Question
3. (15 points) EECS Corporation has identified six investment opportunities that will last 1 year. The firm draws up a list of all potentially acceptable
3. (15 points) EECS Corporation has identified six investment opportunities that will last 1 year. The firm draws up a list of all potentially acceptable projects, and computes their IRR and PW at 8.5% MARR as shown below. Project Initial Investment IRR PW(8.5%) ($) 1 17,000 8% 1300 2 12,000 10% 1120 3 15,000 5% 600 4 20,000 20% 3800 5 10,000 7% 720 6 16,000 15% 1700 a) If the marginal cost of capital for additional funds is 8% for $40,000 and 9% for the next 60,000 and the lending rate (if the company wants to lend their money) is 6% Assume that the company has an investment budget of (i) $60,000 on hand and (ii) $0 on hand, and that there is no partial project investment, what is the best investment strategy and MARR in each case? (Note in both cases, additional borrowing is allowed if it is beneficial to do so.) Draw an Investment Opportunity Schedule (IOS) and Marginal Cost of Capital (MCC) below
3b) Again with the firm budget of $80,000 (no additional borrowing, allowed) formulate (but DO NOT solve) an integer programming model to help determine an optimal portfolio of the above projects based on maximizing the present worth at 8.5%. Also, the following conditions must be observed. Projects1, 4 and 6 are mutually exclusive, and project 5 cannot be taken without either project 2 or 3 take
Draw an Tnvesiment Opportunity Schedule IOS) and Maiginal C of Capilal (MCC) below 25 20 15 20000 40000 60000 S0000 00000 Draw an Tnvesiment Opportunity Schedule IOS) and Maiginal C of Capilal (MCC) below 25 20 15 20000 40000 60000 S0000 00000Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started