Question
A company is considering investing up to 1.5 million dollars in an investment portfolio consisting of a set of the following five independent capital projects
A company is considering investing up to 1.5 million dollars in an investment portfolio consisting of a set of the following five independent capital projects (all of these projects will end at the end of 10 years). The initial investment for Project 1, 2, 3, 4, and 5 is $300k, $400k, $450k, $500k, and $600k, respectively. The annual return for these projects are $80k, $100k, $105k, $125k and $140k and the salvage value for these projects at the end of year 10 are $50k, $50k, $60k, $75k and $75k, respectively. Projects 2 and 4 are mutually exclusive. Also, project 1 is contingent on either or both projects 2 and 3. The company's MARR is 10%. Determine the optimal investment portfolio given that:
a) The investment opportunities are indivisible. b) The investment opportunities are divisible.
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