Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 15, Problem 15P
a:
To determine
All the available combination with the budget c.
b:
To determine
Calculate the new present worth.
c:
To determine
Optimal section.
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All of the following are correct when a capital budgeting problem is solved using the 0-1 integer linear programming model, except: (a) Partial investment in a project is acceptable. (b) The objective is to maximize the present worth of the investments (c) Budget constraints may be present for the first year only or for several years. (d) Contingent and dependent project restrictions may be considered
A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4,231 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit.
Identify seven combinations of project investments and a bank deposits which exhaust the budget.
Which of the above combinations should the firm choose when the bank deposit rate is (i) 15% or (ii) 20%? Explain your answer and show your work.
Suppose there is no option to deposit in the bank, but the projects are "divisible" (e.g. you may have 25% of project A). Which combination should the firm choose? Explain your answer and show your work. Use 15% as the deposit rate (discount rate).
All of the following are factors that affect the effective MARR of a project, except: (a) Project risk (b) Product selling price (c) Availability of capital (d ) Attractiveness of other investment opportunities
Chapter 15 Solutions
Contemporary Engineering Economics (6th Edition)
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