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 1 17,000 2 12,000 3 15,000 4 20,000 5 10,000 6 16,000 IRR 8% 10% 5% 20% 7% 15% PW(8.5%) ($) 1300 1120 600 3800 720 1700 a) If the marginal cost of capital for additional funds and the lending rate (if the company wants to lend 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.)

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 PW(8.5%) ($) 1300 Initial Investment 17,000 12,000 15,000 20,000 10,000 16,000 IRR 8% 1 2 10% 1120 5% 20% 600 4 3800 7% 720 5 6 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 25 20 15 10 5 20000 40000 60000 80000 100000 3b) Again with the firm budget of $80,000 (no additional borrowing, allowed) formulate (but DO NOT solve) an integer programming model to help determine an optimal portfolio of the above projects based on maximizing the present worth at 8.5%. Also, the following conditions must be observed. Projects1, 4 and 6 are mutually exclusive, and project 5 cannot be taken without either project 2 or 3 taken L 3. (15 points) EECS Corporation has identified six investment opportunities that will last 1 year. The firm draws up a list of all potentially acceptable projects, and computes their IRR and PW at 8.5% MARR as shown below Project PW(8.5%) ($) 1300 Initial Investment 17,000 12,000 15,000 20,000 10,000 16,000 IRR 8% 1 2 10% 1120 5% 20% 600 4 3800 7% 720 5 6 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 25 20 15 10 5 20000 40000 60000 80000 100000 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 taken L