Yakima Construction Corporation (YCC) is considering a number of different development projects. The cash outflows that would
Question:
Each project must be done in full (with the corresponding cash flows for all four years) or not done at all. Furthermore, there are the following additional considerations. Project 1 cannot be done unless Project 2 is also undertaken, and projects 3 and 4 would compete with each other, so they should not both be chosen.
YCC expects to have the following cash available to invest in these projects: $40 million for year 1, $25 million for year 2, $16 million for year 3, and $12 million for year 4. Any available money not spent in a given year is then available to spend the following year. YCC's policy is to choose their projects so as to maximize their total expected NPV.
a. Formulate a BIP model in algebraic form for this problem.
b. Formulate and solve this model on a spreadsheet?
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Step by Step Answer:
Introduction to Management Science A Modeling and Cases Studies Approach with Spreadsheets
ISBN: 978-0078024061
5th edition
Authors: Frederick S. Hillier, Mark S. Hillier