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Spencer Enterprises must choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows:   a.)Develop and solve an integer programming model for maximizing the net present value.

Spencer Enterprises must choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows:   a.)Develop and solve an integer programming model for maximizing the net present value.

Essentials Of Investments
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
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Spencer Enterprises must choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows:

 

a.)Develop and solve an integer programming model for maximizing the net present value.

 

**Investment Alternatives and Capital Requirements Analysis** This table provides an overview of different investment alternatives, their associated net present value (NPV), and the capital requirements across three years. ### Table Structure: - **Columns:** 1. **Alternative:** Lists various investment options. 2. **Net Present Value ($):** Indicates the net present value of each investment alternative. 3. **Capital Requirements ($):** Displays the financial requirement over three years for each alternative. - **Year 1** - **Year 2** - **Year 3** - **Rows:** - **Investment Alternatives:** 1. Limited warehouse expansion 2. Extensive warehouse expansion 3. Test market new product 4. Advertising campaign 5. Basic research 6. Purchase new equipment ### Details: #### 1. Limited Warehouse Expansion - **Net Present Value:** $4,000 - **Yearly Capital Requirements:** - Year 1: $3,000 - Year 2: $1,000 - Year 3: $4,000 #### 2. Extensive Warehouse Expansion - **Net Present Value:** $6,000 - **Yearly Capital Requirements:** - Year 1: $2,500 - Year 2: $3,500 - Year 3: $3,500 #### 3. Test Market New Product - **Net Present Value:** $10,500 - **Yearly Capital Requirements:** - Year 1: $6,000 - Year 2: $4,000 - Year 3: $5,000 #### 4. Advertising Campaign - **Net Present Value:** $4,000 - **Yearly Capital Requirements:** - Year 1: $2,000 - Year 2: $1,500 - Year 3: $1,800 #### 5. Basic Research - **Net Present Value:** $8,000 - **Yearly Capital Requirements:** - Year 1: $5,000 - Year 2: $1,000 - Year 3: $4,000 #### 6. Purchase New Equipment - **Net Present Value:** $3,000 -
Transcribed Image Text:**Investment Alternatives and Capital Requirements Analysis** This table provides an overview of different investment alternatives, their associated net present value (NPV), and the capital requirements across three years. ### Table Structure: - **Columns:** 1. **Alternative:** Lists various investment options. 2. **Net Present Value ($):** Indicates the net present value of each investment alternative. 3. **Capital Requirements ($):** Displays the financial requirement over three years for each alternative. - **Year 1** - **Year 2** - **Year 3** - **Rows:** - **Investment Alternatives:** 1. Limited warehouse expansion 2. Extensive warehouse expansion 3. Test market new product 4. Advertising campaign 5. Basic research 6. Purchase new equipment ### Details: #### 1. Limited Warehouse Expansion - **Net Present Value:** $4,000 - **Yearly Capital Requirements:** - Year 1: $3,000 - Year 2: $1,000 - Year 3: $4,000 #### 2. Extensive Warehouse Expansion - **Net Present Value:** $6,000 - **Yearly Capital Requirements:** - Year 1: $2,500 - Year 2: $3,500 - Year 3: $3,500 #### 3. Test Market New Product - **Net Present Value:** $10,500 - **Yearly Capital Requirements:** - Year 1: $6,000 - Year 2: $4,000 - Year 3: $5,000 #### 4. Advertising Campaign - **Net Present Value:** $4,000 - **Yearly Capital Requirements:** - Year 1: $2,000 - Year 2: $1,500 - Year 3: $1,800 #### 5. Basic Research - **Net Present Value:** $8,000 - **Yearly Capital Requirements:** - Year 1: $5,000 - Year 2: $1,000 - Year 3: $4,000 #### 6. Purchase New Equipment - **Net Present Value:** $3,000 -
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