The Tatham Company is considering seven investments. The cash required for each investment and the net present
Question:
The Tatham Company is considering seven investments. The cash required for each investment and the net present value (NPV) each investment adds to the firm are given in the table below. The cash available for investment is $15,000. The crucial assumption here is that if Tatham wishes to take part in any of these envestments, it must go "all the way". It cannot, for example go halfway in investment 1 by investing $2,500 and realizing an NPV of $8,000. If partial investments were allowed we could use our typical linear programming (like the portfolio selection problem). In this case we must use binary programming. Tatham wants to find the investment policy that maximizes its NPV. . CONSTRAINT PROBLEM , IN EXCEL, NEED TO FIND CONSTRAINTS
A. At most 2 of the first 4 projects can be selected.
B. If investment 1 is selected, then investment 2 must also be selected.
C. At least 1 of the last three projects (5-7) must be selected.
D. Format your constraints appropriately.(my question)
ADD THE FOLLOWING CONSTRAINTS TO OPTIMAL SOLUTION THAT IS GIVEN. ADD THE FOLLOWING CONSTRAINTS TO THE PROBLEM AND USE EXCEL SOLVER TO SOLVE AGAIN
| Input data on potential investments | |||||||
| Investment | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Investment cost | $5,000 | $2,500 | $3,500 | $6,000 | $7,000 | $4,500 | $3,000 |
| NPV | $16,000 | $8,000 | $10,000 | $20,000 | $22,000 | $12,000 | $8,000 |
| NPV per investment dollar | |||||||
| Investment levels | 1 | 1 | 0 | 0 | 1 | 0 | 0 |
| Budget constraint | |||||||
| Amt invested | Budget | ||||||
| $14,500 | <= | $15,000 | |||||
| Total NPV | $46,000 | ||||||
Expert Answer:
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
