10.1. Your firm has recently reached an expansion phase and is seeking possible new geographic regions to market the newly patented chemical compound Glupto. The five regional projections are as follows:

a. Which regions would be profitable to the firm?

Which of the five is the most profitable?

b. If current budgeting can support a $100 million expenditure in year 0, what combination of regions is optimal?

Cash Flows (in $millions)

Years from Now: 0 1 2 3 4 5 Northeast 95 15 20 25 30 30 Midwest 75 15 20 20 25 30 Southeast 60 10 15 20 20 25 West Coast 35 5 10 10 15 15 Southwest 20 5 5 6 6 10 Zero-coupon yields (%) 6.5% 7% 7% 7.5% 8%

c. Assume now that you can expand without regional saturation. With the budget constraint in part

b, which region is optimal?