Question
Filip Financial Services must choose among a set of new investment alternatives. The potential alternatives, their net present values based on projected future returns, and
Filip Financial Services must choose among a set of new investment alternatives. The potential alternatives, their net present values based on projected future returns, and their capital requirements over the next three years are given in the table below.
|
Alternative | Net Present Value | Capital Requirements Year 1 Year 2 Year 3 | ||
| Limited Expansion | $30,000 | $5,000 | $3,000 | $4,000 |
| Extensive Expansion | $80,000 | $8,000 | $2,000 | $3,000 |
| Advertising Campaign | $70,000 | $7,000 | $3,000 | $5,000 |
| Purchase New Equipment | $20,000 | $10,000 | $4,000 | $2,000 |
| Add a Second Shift | $100,000 | $6,000 | $1,000 | $1,000 |
| Add Personnel | $64,000 | $3,000 | $2,000 | $1,000 |
| Test Market New Product | $50,000 | $6,000 | $8,000 | $10,000 |
| Research and Development | $40,000 | $4,000 | $4,000 | $4,000 |
| Capital Funds Available |
| $20,000 | $18,000 | $24,000 |
Filip will undertake at most one of the expansion alternatives. And the two alternatives to Add a Second Shift and to Add Personal are co-requisites (meaning they must either do both or neither.) Develop an integer programming model that will allow Filip Financial to select the set of investment alternatives that will maximize their net present value.
Step 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
Principles Of Banking
Authors: Allyn C Buzzel
11th Edition
089982689X, 9780899826899
