10. A lending fi rm is considering 6 independent and indivisible investment alternatives which, at any time the fi rm chooses, can be exited with a full refund of the initial investment. A total of $200,000 is available for investment, and the MARR is 10% (Note! There is no planning horizon specifi ed, so the fi rm can choose any number of years they wish—the optimum portfolio and the IRR will remain the same since the initial investment and the salvage value are the same, and the annual returns are constant each year.):

For the original problem:

a. Which alternatives should the lending fi rm select as optimal?

b. What is the present worth for the optimum portfolio?

c. What is the IRR for the portfolio?
Several possible constraints have been identifi ed for additional analysis by the lending fi rm. Determine (1) the optimum investment portfolio, (2) the present worth, and (3) the IRR when:

d. Investments 4 and 5 are mutually exclusive.

e. Investment 1 is contingent on investment 2 being pursued.

f. Exactly four investments must be pursued.
g. All of the constraints

d, e, and f are considered simultaneously.
Reconsider the original problem:
h. Determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current limit on investment capital, (2) plus 20%, and (3) minus 20%.
i. Determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current MARR, (2) plus 20%, and (3) minus 20%.

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Alternative Initial Investment Annual Return 12345 $25,000 $2,600 2 $35,000 $3,750 3 $30,000 $3,050 4 $40,000 $4,775 5 $60,000 $6,750 6 $50,000 $5,850