This is a typical capital budgeting model. The company must decide which of the 15 potential investments to invest in -- all or nothing for each. The total investmetn cost must not exceed the budget, and the objective is to maximize the total NPV. In addition, there is a side constraint: no more than two investments 1 to 6 can be invested in. Which of the following is true of the optimal solution?  (Make sure integer Optimality % is set to 0)

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
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This is a typical capital budgeting model. The company must decide which of the 15 potential investments to invest in -- all or nothing for each. The total investmetn cost must not exceed the budget, and the objective is to maximize the total NPV. In addition, there is a side constraint: no more than two investments 1 to 6 can be invested in. Which of the following is true of the optimal solution? 

(Make sure integer Optimality % is set to 0)

 

 

J
K
A
D
E
F
H
M
P
Q
1 Capital budgeting model
2
3 Input data on potential investments
Investment
1
2
4
7
8
9.
10
11
12
13
14
15
Investment cost
5520
6220
5000
4560
5540
4420
6840
3450
4350
5380
4160
5320
6740
4080
3780
6
NPV
18820
20620
16980
15050
17920
15420
21880
10900
13680
17870
14360
17110
20890
14070
12680
7
NPV per investment dollar
3.409
3.315
3.396
3.300
3.235
3.489
3.199
3.159
3.145
3.322
3.452
3.216
3.099
3.449
3.354
8
9
Decisions: whether to invest
10 Investment levels
11
12 Budget constraint
13
Amount invested
Budget
14
<=
37000
15
16 Objective to maximize
17 Total NPV
18
Transcribed Image Text:J K A D E F H M P Q 1 Capital budgeting model 2 3 Input data on potential investments Investment 1 2 4 7 8 9. 10 11 12 13 14 15 Investment cost 5520 6220 5000 4560 5540 4420 6840 3450 4350 5380 4160 5320 6740 4080 3780 6 NPV 18820 20620 16980 15050 17920 15420 21880 10900 13680 17870 14360 17110 20890 14070 12680 7 NPV per investment dollar 3.409 3.315 3.396 3.300 3.235 3.489 3.199 3.159 3.145 3.322 3.452 3.216 3.099 3.449 3.354 8 9 Decisions: whether to invest 10 Investment levels 11 12 Budget constraint 13 Amount invested Budget 14 <= 37000 15 16 Objective to maximize 17 Total NPV 18
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