Four projects are available for investment . The projects require the cash flows and yield the net
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Question:
Four projects are available for investment. The projects require the cash flows and yield the net present values (NPV) (in millions) shown in Table 62. If $6 million is available now for investment , find the investment plan that maximizes NPV.
Table 62
Capital budgeting | |||||
Note: All cash amounts are in $millions. | |||||
Cash outflows and NPVs of projects | |||||
Project 1 | Project 2 | Project 3 | Project 4 | ||
Cash outflow | $3 | $5 | $2 | $4 | |
NPV | $5 | $8 | $3 | $7 | |
Projects to invest in (1 if selected, 0 if not) | |||||
Project 1 | Project 2 | Project 3 | Project 4 | ||
Cash flow constraint | Outflow | Budget | |||
Total NPV |
(a) Write a LINGO statement that sets the variable "value" equal to the larger of v1 or v2.
(b) the capital budgeting problem , which project(s) were selected based on the budgetary constraints?
(c) What was the total NPV for the budget?
Related Book For
Practical Management Science
ISBN: 978-1305250901
5th edition
Authors: Wayne L. Winston, Christian Albright
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