# Question

The board of directors of General Wheels Co. is considering six large capital investments. Each investment can be made only once. These investments differ in the estimated long-run profit (net present value) that they will generate as well as in the amount of capital required, as shown by the following table (in units of millions of dollars):

The total amount of capital available for these investments is $100 million. Investment opportunities 1 and 2 are mutually exclusive, and so are 3 and 4. Furthermore, neither 3 nor 4 can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities 5 and 6. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (net present value).

(a) Formulate a BIP model for this problem.

(b) Use the computer to solve this model.

The total amount of capital available for these investments is $100 million. Investment opportunities 1 and 2 are mutually exclusive, and so are 3 and 4. Furthermore, neither 3 nor 4 can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities 5 and 6. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (net present value).

(a) Formulate a BIP model for this problem.

(b) Use the computer to solve this model.

## Answer to relevant Questions

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