Problems. Problem 1. A division in a large company has been allocated $160 million for capital projects this year. Managers have proposed five projects for the budgeting committee to consider. The committee would like to maximize the total NPV. What projects should be selected? • There is one project of each type, each project has an estimated NPV (net present value, a measurement of profit) and each requires a capital expenditure (this comes out of the budget above). • At least 2 projects must be done. • If Project 5 is chosen, Project 1 must be done as well. Project 1 Project 2 Project 3 Project 4 Project 5 NPV (in millions of $) 10 17 16 8 14 Expenditure (millions of $) 48 96 80 32 64 a. What are your decision variables (x)? State the units for each. b. Write down your objective function (include min/max with the equation) and constraints below, include descriptions/explanations/calculations on the right. Delete/add rows as needed. (objective function above, constraints below)
Problems. Problem 1. A division in a large company has been allocated $160 million for capital projects this year. Managers have proposed five projects for the budgeting committee to consider. The committee would like to maximize the total NPV. What projects should be selected? • There is one project of each type, each project has an estimated NPV (net present value, a measurement of profit) and each requires a capital expenditure (this comes out of the budget above). • At least 2 projects must be done. • If Project 5 is chosen, Project 1 must be done as well. Project 1 Project 2 Project 3 Project 4 Project 5 NPV (in millions of $) 10 17 16 8 14 Expenditure (millions of $) 48 96 80 32 64 a. What are your decision variables (x)? State the units for each. b. Write down your objective function (include min/max with the equation) and constraints below, include descriptions/explanations/calculations on the right. Delete/add rows as needed. (objective function above, constraints below)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Problems.
Problem 1. A division in a large company has been allocated $160 million
for capital projects this year. Managers have proposed five projects for the
budgeting committee to consider. The committee would like to
maximize the total NPV. What projects should be selected?
•
There is one project of each type, each project has an estimated NPV
(net present value, a measurement of profit) and each requires a
capital expenditure (this comes out of the budget above).
• At least 2 projects must be done.
• If Project 5 is chosen, Project 1 must be done as well.
Project 1 Project 2 Project 3 Project 4 Project 5
NPV (in millions of $)
10
17
16
8
14
Expenditure (millions of $)
48
96
80
32
64
a. What are your decision variables (x)? State the units for each.
b. Write down your objective function (include min/max with the
equation) and constraints below, include
descriptions/explanations/calculations on the right. Delete/add rows as
needed.
(objective function above, constraints below)
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