The board of directors of General Wheels Co. is considering six large capital investments. Each investment can be made only once. These investments differ in the estimated long-run profit (net present value) that they will generate as well as in the amount of capital required, as shown by the following table (in units of millions of dollars): Investment 6 Opportunity Estimated profit | Capital required 1 2 4 5 15 12 16 18 9. 11 38 33 39 45 23 27 The total amount of capital available for these investments is $100 million. Investment opportunities 1 and 2 are mutually exclusive, and so are 3 and 4. Furthermore, neither 3 nor 4 can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities 5 and 6. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (net present value). (a) Formulate a model for this problem.

The board of directors of General Wheels Co. is considering six large capital investments. Each investment can be made only once. These investments differ in the estimated long-run profit (net present value) that they will generate as well as in the amount of capital required, as shown by the following table (in units of millions of dollars): Investment 6 Opportunity Estimated profit | Capital required 1 2 4 5 15 12 16 18 9. 11 38 33 39 45 23 27 The total amount of capital available for these investments is $100 million. Investment opportunities 1 and 2 are mutually exclusive, and so are 3 and 4. Furthermore, neither 3 nor 4 can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities 5 and 6. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (net present value). (a) Formulate a model for this problem.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...

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