lick here for the Excel Data File The owners of the firm, Dave Peterson and Ron Johnson, have raised $20 million of investment capital for these projects. Dave and Ron now want to select the combination of projects that will maximize their total estimated long-run profit (net present value) without investing more than $20 million. Formulate and solve this model on a spreadsheet. Determine the combination of each project that Dave and Ron should undertake to maximize profit. Note: Leave no cells blank. Enter "0" wherever required. Project 1 Project 2 Project 3 Project 4 Project 5 Undertake? (enter 1 if 'yes' or 0 if 'no' Determine the total profit.
Cost of Debt, Cost of Preferred Stock
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Cost of Common Stock
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A real-estate development firm, Peterson and Johnson, is considering five possible development projects. Using units of millions of dollars, the following table shows the estimated long-run profit (
| Project 1 | Project 2 | Project 3 | Project 4 | Project 5 | |
|---|---|---|---|---|---|
| Estimated profit ($million) | 1 | 1.8 | 1.6 | 0.8 | 1.4 |
| Capital Required for Project ($million) | Capital Available ($million) | |||||
|---|---|---|---|---|---|---|
| Project 1 | Project 2 | Project 3 | Project 4 | Project 5 | ||
| Capital | 6 | 12 | 10 | 4 | 8 | 20 |
Click here for the Excel Data File
The owners of the firm, Dave Peterson and Ron Johnson, have raised $20 million of investment capital for these projects. Dave and Ron now want to select the combination of projects that will maximize their total estimated long-run profit (net present value) without investing more than $20 million.
Formulate and solve this model on a spreadsheet.
-
Determine the combination of each project that Dave and Ron should undertake to maximize profit.
Note: Leave no cells blank. Enter "0" wherever required.
Project 1 Project 2 Project 3 Project 4 Project 5 Undertake? (enter 1 if 'yes' or 0 if 'no' -
Determine the total profit.
Note: Round your answer to 1 decimal place.
Total profit:
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