A small pharmaceutical research laboratory must decide which product research activities to undertake with its $25 million available in each of the next two 5-year periods. The products optamine and feasibine are ready for field testing in the first 5-year period at a cost of $13 million and $14 million, respectively. Discretol and zeronex are at an earlier, development stage.

Proposed development activities would require

$4 million in the first 5 years for discretol and $3 million in the second. Corresponding values for zeronex are $2 million and $6 million. Field testing of the two products may also be chosen in the second 5-year period for $10 million and $15 million, respectively, if the corresponding development activity was undertaken in the first 5 years.

The company wishes to maximize future profits from field-tested products, which it estimates at

$510 million for optamine, $640 million for feasibine,

$580 million for discretol, and $469 million for zeronex. All projects must be adopted on an all-or-nothing basis, and no more than one of the two development projects may be selected.

Do

(a) through

(c) as in Exercise 11-5.