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
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?
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