Problems. Problem 1. A division in a large company has been allocated $160 million for capital projects this year. Managers have proposed five projects for the budgeting committee to consider. The committee would like to maximize the total NPV. What projects should be selected? • There is one project of each type, each project has an estimated NPV (net present value, a measurement of profit) and each requires a capital expenditure (this comes out of the budget above). • At least 2 projects must be done. • If Project 5 is chosen, Project 1 must be done as well. Project 1 Project 2 Project 3 Project 4 Project 5 NPV (in millions of $) 10 17 16 8 14 Expenditure (millions of $) 48 96 80 32 64 a. What are your decision variables (x)? State the units for each. b. Write down your objective function (include min/max with the equation) and constraints below, include descriptions/explanations/calculations on the right. Delete/add rows as needed. (objective function above, constraints below)
Problems. Problem 1. A division in a large company has been allocated $160 million for capital projects this year. Managers have proposed five projects for the budgeting committee to consider. The committee would like to maximize the total NPV. What projects should be selected? • There is one project of each type, each project has an estimated NPV (net present value, a measurement of profit) and each requires a capital expenditure (this comes out of the budget above). • At least 2 projects must be done. • If Project 5 is chosen, Project 1 must be done as well. Project 1 Project 2 Project 3 Project 4 Project 5 NPV (in millions of $) 10 17 16 8 14 Expenditure (millions of $) 48 96 80 32 64 a. What are your decision variables (x)? State the units for each. b. Write down your objective function (include min/max with the equation) and constraints below, include descriptions/explanations/calculations on the right. Delete/add rows as needed. (objective function above, constraints below)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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