Question
Gamma Company is planning to invest in several of eight (8) projects. Unfortunately, it faces a range of constraints such as budgetary, number of projects
Gamma Company is planning to invest in several of eight (8) projects. Unfortunately, it faces a range of constraints such as budgetary, number of projects that it can supervise, and the relationship among projects (contingent and/or duplicative).
The Company is seeking your assistance in selecting the projects that will maximize its Net Present Worth given the set of constraints.
Projects | Initial Cost | NPW |
A | 250,000 | 40,000 |
B | 300,000 | 35,000 |
C | 225,000 | 50,000 |
D | 400,000 | 70,000 |
E | 350,000 | 65,000 |
F | 275,000 | 80,000 |
G | 180,000 | 45,000 |
H | 325,000 | 75,000 |
(xxx) = Negative NPW; MARR = 10%
a) Budget = $1,500,000 b) Use the NPW decision criterion to determine the best feasible bundle of projects. c) Investing in project C is contingent on investing in projects E and H. d) Project A must be selected.
The best investment bundle consists of projects a) ABCEH; b) ABDEH; c) ACDEHG; d) ACDFH The NPW ($) of the best investment bundle is a) 265,000; b) 285,000; c) 325,000; d) 305,000 The total cost ($) of the best investment bundle is a) 975,000; b) 1,295,000; c) 1,365,000; d) 1,475,000. |
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