A major public utility in the Gulf has planned the construction of several new major plants 5, 10, and 20 years from now to meet the needs of the growing population in the region they serve. To cover the construction costs, the financial manager will be leading the efforts to invest some of the company’s money now to meet the required cash flow for these future major construction projects. The financial manager has the option of purchasing only three financial assets. Each unit of Asset-1 costs $1million, each unit of Asset-2 costs $2 million, and each unit of Asset-3 costs $3 million.

These three assets produce income 5, 10, and 20 years from now, and that income is needed to cover the minimum cash flow requirements in those years, as shown in the below table.

Year	The income per Unit of Asset ($ million)			Minimum Cashflow Required
	Asset 1	Asset 2	Asset 3
5	9	7	2	$1.6 billion
10		3	5	$400 million
20	3	5	9	$1.2 billion

The financial manager wishes to determine the mix of investments in these three assets that will cover the cash flow requirements while minimizing the total amount invested. Provide a complete algebraic and spreadsheet models for this case, solve the spreadsheet model and comment on your results in a textbox on the spreadsheet.

Answer rating: 100% (QA)

A LET THE NO OF UNITS FOR ASSET 1 BE a FOR ASSET 2 b AND FOR ASSET 3 c TOTAL COST IN MILLION 1a2b... View the full answer