Allied Products has six R&D projects that are potential candidates for selection during the upcoming fiscal year. The table at the bottom of the page provides the expected net present value (NPV) and capital requirements over the next five years for each project. The table also indicates the planned budget expenditures for the entire R&D program during each of the next five years. Which projects should be selected?

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Table for Problem 6-22 PROJECT 1 2 3 4 5 6 R&D Budget NPV (THOUSANDS) $140 $260 $88 $124 $176 $192 YEAR 1 $ 80 $ 95 $ 58 $ 32 $115 $ 48 $225 CAPITAL REQUIRED (THOUSANDS) YEAR 2 YEAR 3 YEAR 4 $25 $40 $17 $24 $25 $20 $80 $22 $5 $14 $10 $25 $12 $60 $18 $10 $12 $6 $10 $32 $50 Table for Problem 6-22 PROJECT 1 2 3 4 5 6 R&D Budget NPV (THOUSANDS) $140 $260 $88 $124 $176 $192 YEAR 1 $ 80 $ 95 $ 58 $ 32 $115 $ 48 $225 CAPITAL REQUIRED (THOUSANDS) YEAR 2 YEAR 3 YEAR 4 $25 $40 $17 $24 $25 $20 $80 $22 $5 $14 $10 $25 $12 $60 $18 $10 $12 $6 $10 $32 $50

Answer rating: 100% (QA)

It is first necessary to define the decision variables to solve the problem Let A be the binary variable for the project 1 A I if selected I A 0 if no... View the full answer