A petroleum refinery in Dubai wants to expand its refinery and stock-yard for the expected surge in
Question:
A petroleum refinery in Dubai wants to expand its refinery and stock-yard for the expected surge in the oil prices in the coming years. The company has four distinct activities in its strategic plan—plant expansion, stockyard improvement, adopting modern technology and research and development. Each of the different activities has a cost and an expected NPV. The following table lists the costs, available capital, and NPV of each activity required to execute each of the options in millions of dirhams.
The company wants to maximize it’s net present value considering its budgetary constraints.
a. Formulate an integer programming model for this problem.
b. Solve this model by using the computer.
Year 1 Year 2 Year 3 Year 4 NPV (million AED) Plant expansion (million AED) 22 18 20 20 80 Stockyard improvement 20 19 20 17 Adopting modern (million AED) AED) 15 25 26 50 technology Research and (million development (million AED) 20 20 30 36 40 30 Available capital (million AED) 60 62 67 40
Step by Step Answer:
a Integer programming model is following Decision variables Let X1 1 if Plant expa...View the full answer
Related Video
NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.
Students also viewed these Business questions
-
The comparative statements of cash flows for Wung Corporation, a manufacturer of high-quality suits for men, follow. To expand its markets and familiarity with its brand, the company attempted a new...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
The Comparative statements of cash flows for Executive style corporation, a manufacturer of high-quality suits for men, appear on the next page. To expand its markets and familiarity with its brand,...
-
As an HR director for IMF Plastics Manufacturing, you receive a phone call about communicating changes made by the company to provide additional shifts.As soon as the call ends, you begin the process...
-
The accompanying table shows hypothetical demand and supply schedules for milk per year. The U.S. government decides that the incomes of dairy farmers should be maintained at a level that allows the...
-
Define capital investment. List at least three examples of capital investments other than the examples provided in the chapter.
-
More and more Japanese companies are moving in on what once was an exclusive U.S. preserve: making and selling the complex equipment that makes semiconductors. World sales are between \($3\) billion...
-
Palermo Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in quarter 2; 15,000 in quarter 3; and 18,000 in quarter 4. Using a sales price of $70 per unit, prepare the sales budget...
-
Lakeside Incorporated manufactures four lines of remote control boats and uses activity-based costing to calculate product cost. Activity Pools Machining Setup Quality control Estimated Total Cost $...
-
Consider Case Study 4.2 on page 170. Suppose 18 specimens were used for each type of paint in an experiment and the actual difference in mean drying time, turned out to be 1.0. (a) Does this seem to...
-
A state government plans to set up new police stations for the public. The state has seven districts (A through G). Each police station can serve a radius of 30 miles. A district may receive service...
-
A bakery specializes in cupcakes and chocolate cookies. The bakery estimates that cupcakes will account for 75% of its total sales, whereas chocolate cookies will account for 25% of its total sales....
-
The audit committees responsibility for auditor independence concerns a. Ensuring that partners of the public accounting firm are not stockholders in the company. b. Ensuring that nonaudit services...
-
Companies are obliged to pay zakat if they fulfil any of the following conditions. I. If the law is passed requiring the companies to pay zakat II. If they have not paid tax III. If the articles of...
-
There are various types of sukuk structures. List and explain four of these.
-
What are the characteristics common to communities, whether offline or online?
-
Wikipedia, the most famous wiki platform, tends to pop up at the top of most Internet searches. However, the Internet is teeming with wiki sites or wikifarms hosting countless wiki communities with...
-
We cannot provide patient care unless patients show proof of insurance. Your Task. When indirectness or tact is required, use passive-voice verbs. Revise the following sentences so that they are in...
-
A common flashlight bulb is rated at 0.300 A and 2.90 V (the values of current and voltage under operating conditions). If the resistance of the bulb's tungsten filament at room temperature (20.0C)...
-
Sundial Technologies produces and sells customized network systems in New Brunswick. The company offers a 60-day, all software and labor-and an extra 90-day, parts-only- warranty on all of its...
-
Develop a linear trend line model for the freshman applications data at State University in Problem 12-32. a. Does this forecast appear to be more or less accurate than the linear regression forecast...
-
Develop a linear trend line model for the freshman applications data at State University in Problem 12-32. a. Does this forecast appear to be more or less accurate than the linear regression forecast...
-
ITown is a large computer discount store that sells computers and ancillary equipment and software in the town where State University is located. It has collected historical data on computer sales...
-
A nursing team is having a routine meeting. One of the nurses, Stephen, is at the end of a 12-hour shift, and another nurse, Tanya, is just beginning hers. Tanya is a senior nurse in the unit with...
-
Assume that you are the leadership team of a convenience store chain that has more than 300 outlets. The company is facing an inventory shrinkage problem, and store managers report that the main...
-
1 . An employee at Amy's candles has noticed that some order quantities in the two reports presented are different although the order numbers are the same. We normally refer to such data as dirty....
Study smarter with the SolutionInn App