Question: A real estate development firm, Peterson and Johnson, is considering five possible development projects. The following table shows the estimated long-run profit ( net present

A real estate development firm, Peterson and Johnson, is considering five possible development projects. The following table shows the estimated long-run profit (net present value) that each project would generate, as well as the amount of investment required to undertake the project, in units of millions of dollars.

The owners of the firm, Dave Peterson and Ron Johnson, have raised $20 million of investment capital for these projects. Dave and Ron now want to select the combination of projects that will maximize their total estimated long-run profit (net present value) without investing more that $20 million.
(a) Formulate a BIP model for this problem.
(b) Display this model on an Excel spreadsheet.
(c) Use the computer to solve this model.

Development Project 2 1.8 4 5 1.4 Estimated profit 1 Capital required 6 12 1.6 10 0.8 4

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