9. A division of Conoco-Phillips is involved in their periodic capital budgeting activity and the engineering and operations staffs have identifi ed ten indivisible investments with cash fl ow parameters shown below. Conoco-Phillips uses a 10-year planning horizon and a MARR of 10% in evaluating such investments.

The division’s capital limit for this budgeting cycle is $2,500,000.

For the original problem statement:

a. Which alternatives should Conoco-Phillips select?

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

c. What is the IRR for the portfolio?
In addition to the original problem statement, Conoco-Phillips has noted that investments 1 and 3 are mutually exclusive, investment 4 is contingent on either investment 2 or investment 5 being funded, and at least fi ve investments must be made.

d. Which alternatives should now be selected?

e. What is the present worth for the new portfolio?

f. What is the IRR for the investment portfolio?

Consider the original problem:
g. 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%.
h. 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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Investment Initial Investment Annual Return Salvage Value 10 12345678 SO $150,000 $35,000 $25,000 $200,000 $38,000 $50,000 $225,000 $45,000 $22,500 $275,000 $60,000 $27,500 $350,000 $75,000 $55,000 $400,000 $95,000 $75,000 $475,000 $110,000 $50,000 $500,000 $85,000 $100,000 9 $550,000 $120,000 $75,000 $600,000 $125,000 $75,000