Question
Consider a small Oil production firm with 5 competing oil production projects, A - E. The...
Consider a small Oil production firm with 5 competing oil production projects, A - E.
The table below shows the estimated long-term profit (Net Present Value) for each project as well as the amount of investment capital required to start the project.
You have been contacted to help select the best combination of projects to maximize the Net Present Value subject to the capital investment limit of $32 million.
|
Production Project |
||||||
|
A |
B |
C |
D |
E |
||
|
Estimated Profit (millions) |
25 |
20 |
19 |
28 |
21 |
|
|
Capital Required (millions) |
11 |
8 |
14 |
19 |
13 |
|
1) Formulate a Binary Integer Programming (BIP) model on a spreadsheet.
2) Solver the model using Solver.
Homework Answers
Answer #1
Below is the screenshot of the LP table -
Below is the screenshot of the formula applied -
Below is the screenshot of the LP solver -
Below is the screenshot of the result obtained -
Not the answer you're looking for?
Similar Questions
A private equity firm is considering five competing projects in which to invest in the upcoming...
A private equity firm is considering five competing projects in
which to invest in the upcoming quarter. The firm needs to decide
how to allocate its available capital based upon the combination of
projects(denoted as a to e)selected to maximize returns(based upon
net present value(npv)).Table 1 below presents the capital
requirements and the NPV for each project, along with the
associated risk(given as a percentage of the initial
investment).The company has $43 million in capital to allocate,
with the goal...
Brooks Development Corporation (BDC) faces the following capital budgeting decision. Six real estate projects are available...
Brooks Development Corporation (BDC) faces the following capital
budgeting decision. Six real estate projects are available for
investment. The net present value and expenditures required for
each project (in millions of dollars) are as follows:
Project 1 2 3
4 5 6
Net Present value ($Millions) $15 $5 $13 $14
$20 $9
Expedature required ($Millions) $90 $34 $81 $70
$114 $50
There are conditions that limit the investment alternatives:...
Reconsider the California Manufacturing Co. case study presented in Section 7.1. The mayor of San Diego...
Reconsider the California Manufacturing Co. case study presented
in Section 7.1. The mayor of San Diego now has contacted the
company’s president, Armando Ortega, to try to persuade him to
build a factory and perhaps a warehouse in that city. With the tax
incentives being offered the company, Armando’s staff estimates
that the net present value of building a factory in San Diego would
be $6.1 million and the amount of capital required to do this would
be $3.5 million....
Oxford Company has limited funds available for investment and must ration the funds among four competing...
Oxford Company has limited funds available for investment and
must ration the funds among four competing projects. Selected
information on the four projects follows:
Project
Investment
Required
Net
Present
Value
Life of
the
Project
(years)
Internal
Rate
of Return
(percent)
A
$990,000
$229,400
6
18%
B
$740,000
$104,350
11
13%
C
$690,000
$181,000
6
19%
D
$890,000
$143,420
4
17%
The net present values...
The Valley Research Inc. is contemplating a research and development (R&D) program encompassing eight potential research...
The Valley Research Inc. is contemplating a research and
development (R&D) program encompassing eight potential research
projects. All the projects are expected to go on simultaneously.
The company is constrained from embarking on all projects by the
number of scientists it has and the budget available for R&D
projects. The company has 25 scientists and 300 thousand dollars
budgeted for R&D projects. Furthermore, since projects 2 and 5
require the involvement of the same scientists, both of them would
not...
Oxford Company has limited funds available for investment and must ration the funds among four competing...
Oxford Company has limited funds available for investment and
must ration the funds among four competing projects. Selected
information on the four projects follows:
Project
Investment
Required
Net
Present
Value
Life of
the
Project
(years)
Internal
Rate
of Return
A
$
890,000
$
459,687
8
23
%
B
$
690,000
$
227,448
13
16
%
C
$
590,000
$
279,681
8
22
%
D
$
790,000
$
159,067
4
19
%
The net present values above have been computed using...
The following data are supplied relating to two investment projects, only one of which may be...
The following data are supplied relating to two investment
projects, only one of which may be selected:
Project
A
project B
(
£)
(£)
Initial Capital expenditure
50,000
50,000
Profit (loss) year 1
25,000
10,000
2
20,000
10,000
3
15,000
14,000
4
10,000
26,000
Estimated resale value at end of year 4
10,000
10,000
Notes:
Profit is calculated after deducting straight-line
depreciation.
The Cost of Capital is 10 per
cent.
Required:
Calculate...
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of...
Consider the following cash flows for two mutually exclusive
capital investment projects. The required rate of return is 15%.
Use this
Year Project A
Cash Flow Project B
Cash Flow
0 -$40,000 -$30,000
1 12,000 9,000
2 12,000 9,000
3 12,000 9,000
4 10,800
8,100
5 10,800 8,100
6 5,400
8,100
7. What is the profitability index of project B?
a) 1.03
b) 1.06
c) .94
d) 1.09
e) 1.117
8. Calculate the net present value of project A.
a) $1,564.25
b) $1,227.71
c) $3,802
d) $2,709,21
e) $331.40
A company is considering a 3-year project that requires paying $5,000,000 for a cutting-edge production equipment....
A company is considering a 3-year project that requires paying
$5,000,000 for a cutting-edge production equipment. This equipment
falls into the 5-year MACRS class and will have a market value of
half its original purchase price after 2 years. The project
requires an initial investment in net working capital of $350,000.
The project is estimated to generate $1,200,000 in annual operating
cash flows. The company faces a 40% tax rate. The required rate of
return on projects like this one...
A company is considering a 3-year project that requires paying $5,000,000 for a cutting-edge production equipment....
A
company is considering a 3-year project that requires paying
$5,000,000 for a cutting-edge production equipment. This equipment
falls into the 5-year MACRS class and will have a market value of
half its original purchase price after 2 years. The project
requires an initial investment in net working capital of $350,000.
The project is estimated to generate $1,200,000 in annual operating
cash flows. The company faces a 40% tax rate. The required rate of
return on projects like this one...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 9 minutes ago
asked 29 minutes ago
asked 30 minutes ago
asked 44 minutes ago
asked 59 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 2 hours ago
asked 2 hours ago
asked 2 hours ago
asked 2 hours ago