he board of directors of General Wheels Company is considering seven large capital investments. Each investment can be made only once. These investments differ in the estimated long-run profit (net present value) that they will generate as well as in the amount of capital required, as shown by the following table. Investment Opportunity 1 2 3 4 5 6 7 Estimated Profit ($million) 17 10 15 19 7 13 9 Capital Required for Investment Opportunity ($million) Capital Available ($million) 1 2 3 4 5 6 7 Capital 43 28 34 48 17 32 23 100 The total amount of capital available for these investments is $100 million. Investment opportunities 1 and 2 are mutually exclusive, and so are 3 and 4. Furthermore, neither 3 nor 4 can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities 5, 6, and 7. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (net present value). Formulate and solve a BIP model on a spreadsheet for this problem. Determine the combination of capital investments that will maximize profit. Note: Leave no cells blank. Enter "0" wherever required. Investment opportunity 1 investment opportunity 2 investment opportunity 3 investment opopoirtunity 4 investment opportunity 5 investment opportunity 6 investment opportunity 7 Undertake?(enter 1 if 'yes' or 'no') Determine the total profit.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

The board of directors of General Wheels Company is considering seven large capital investments. Each investment can be made only once. These investments differ in the estimated long-run profit (net present value) that they will generate as well as in the amount of capital required, as shown by the following table.

	Investment Opportunity
1	2	3	4	5	6	7
Estimated Profit ($million)	17	10	15	19	7	13	9

	Capital Required for Investment Opportunity ($million)	Capital Available ($million)
1	2	3	4	5	6	7
Capital	43	28	34	48	17	32	23	100

The total amount of capital available for these investments is $100 million. Investment opportunities 1 and 2 are mutually exclusive, and so are 3 and 4. Furthermore, neither 3 nor 4 can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities 5, 6, and 7. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (net present value).

Formulate and solve a BIP model on a spreadsheet for this problem.

Determine the combination of capital investments that will maximize profit.

Note: Leave no cells blank. Enter "0" wherever required.

	Investment opportunity 1	investment opportunity 2	investment opportunity 3	investment opopoirtunity 4	investment opportunity 5	investment opportunity 6	investment opportunity 7
Undertake?(enter 1 if 'yes' or 'no')