3. Consider the following problem of capital rationing. Assume that projects can be reduced in scale (in
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3. Consider the following problem of capital rationing. Assume that projects can be reduced in scale (in which case their outlays and future cash flows are Table 7.6 Problem of capital rationing Project outlay at Project NPV time o time 1 1 100 -60 -70 2 130 -90 -60 Budget constraints 100 60 scaled down equally). Set up and solve this prob- lem of project selection as a linear program. How sensitive is the solution to the value of project 2's NPV? (How does the solution change as the value for this NPV is changed?)
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Managerial Economics Firms Markets And Business Decisions
ISBN: 9780198775706
1st Edition
Authors: Ian M. Dobbs
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