Change the capital budgeting model in Figure 6.5 so that 80% of each cost in row 5
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Change the capital budgeting model in Figure 6.5 so that 80% of each cost in row 5 is incurred right now, at the beginning of year 1, and the other 20% is incurred a year from now, at the beginning of year 2. You can assume that the NPVs don’t change. The available budget in year 1 is $11.5 million, and the budget in year 2 is $3.5 million.
a. Assuming that available money un-invested in year 1 cannot be used in year 2, what combination of investments maximizes NPV?
b. Suppose that any un-invested money in year 1 is available for investment in year 2. Does your answer to part a change?
Figure 6.5:
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Related Book For
Practical Management Science
ISBN: 978-1305250901
5th edition
Authors: Wayne L. Winston, Christian Albright
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