Kappa & Associates is a medium sized construction management firm. Jacob White the vice president for planning at Kapa, is considering five projects for investment in the upcoming fiscal year. The capital investment required for each project and anticipated eamings (net of the investment cost) for each project are shown below. Jacob has a budget of 15 million dollars to spend on projects this year, and he would like to choose those projects that will maximize total eamings, given his budget constraint. Further issues that Jacob must consider are: The firm has only 40 million dollars of capital to invest in the selected projects.. b. Projects 3 and 4 are complimentary, so management has decided that if either is included in the portfolio, they will take on both of the projects. c. Due to a possible conflict ofinterest, the fim cannot invest in projects 1 and 3 at the same time. a. Project 1 2 3 4 5 Cost 12 million 18 million 13 million 17 million 16 million Profit (Net) 20 million 75 million 37 million 67 million 54 million 9. Imagine yourself a consultant to Kappa & Associates; what recommendations would you make for the fim? Explain your answer carefully. 10. How would change your recommendations in 9 if the capital budget available to Jacob was 50 million rather than 40 million? Explain. 11. How would you revise your recommendations in 9 (the original problem), if the fimm had liberty to take on any of the projects they wished? Explain. Kappa & Associates is a medium sized construction management firm. Jacob White the vice president for planning at Kapa, is considering five projects for investment in the upcoming fiscal year. The capital investment required for each project and anticipated eamings (net of the investment cost) for each project are shown below. Jacob has a budget of 15 million dollars to spend on projects this year, and he would like to choose those projects that will maximize total eamings, given his budget constraint. Further issues that Jacob must consider are: The firm has only 40 million dollars of capital to invest in the selected projects.. b. Projects 3 and 4 are complimentary, so management has decided that if either is included in the portfolio, they will take on both of the projects. c. Due to a possible conflict ofinterest, the fim cannot invest in projects 1 and 3 at the same time. a. Project 1 2 3 4 5 Cost 12 million 18 million 13 million 17 million 16 million Profit (Net) 20 million 75 million 37 million 67 million 54 million 9. Imagine yourself a consultant to Kappa & Associates; what recommendations would you make for the fim? Explain your answer carefully. 10. How would change your recommendations in 9 if the capital budget available to Jacob was 50 million rather than 40 million? Explain. 11. How would you revise your recommendations in 9 (the original problem), if the fimm had liberty to take on any of the projects they wished? Explain
