9 Winstonco is considering investing in three projects. If we fully invest in a project, the realized cash flows (in millions of dollars) will be as shown in Table 44. For example, project 1 requires cash outflow of $3 million today

and returns $5.5 million 3 years from now. Today we have $2 million in cash. At each time point (0, .5, 1, 1.5, 2, and 2.5 years from today) we may, if desired, borrow up to $2 million at 3.5% (per 6 months) interest. Leftover cash earns 3% (per 6 months) interest. For example, if after borrowing and investing at time 0 we have $1 million we would receive $30,000 in interest at time .5 years. Winstonco’s goal is to maximize cash on hand after it accounts for time 3 cash flows. What investment and borrowing strategy should be used? Remember that we may invest in a fraction of a project. For example, if we invest in .5 of project 3, then we have cash outflows of -$1 million at time 0 and .5.

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Card Balance ($) Monthly Rate (%) Saks Fifth Avenue 20,000 .5 Bloomingdale's 50,000 1 Macys 40,000 1.5 TABLE 44 Cash Flow Time (Years) Project 1 Project 2 Project 3 0 -3 -2 -2 .5 -1 -.5 -2 1 +1.8 1.5 -1.8 1.5 1.4 1.5 1 2 1.8 1.5 2.5 1.8 .2 1 3 5.5 -1 6