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)
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
Section: Chapter Questions
Problem 1PS
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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
(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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F29510f02-7cd4-4c69-a0b4-e8a2af3d4d50%2F87de75a9-6dbe-4291-b3fa-a66ce48b859e%2Fpywnver_processed.png&w=3840&q=75)
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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