Question: Consider the following capital rationing problem: Project C 0 C 1 C 2 NPV W -10,000 -10,000 0 +6,700 X 0 -20,000 +5,000 +9,000 Y
Consider the following capital rationing problem:
| Project | C0 | C1 | C2 | NPV |
|---|---|---|---|---|
| W | -10,000 | -10,000 | 0 | +6,700 |
| X | 0 | -20,000 | +5,000 | +9,000 |
| Y | -10,000 | +5,000 | +5,000 | +0 |
| Z | -15,000 | +5,000 | +4,000 | -1,500 |
| Financing Available | 20,000 | 20,000 | 20,000 |
Set up this problem as a linear program and solve it.
Note: You can allow partial investments, that is, " 0 x 1." Calculate and interpret the shadow prices on the capital constraints.
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