Question
Let's say XYZ cpny is considering investing in several projects that have varying capital requirements over the next four years. Faced with limited capital each
- Let's say XYZ cpny is considering investing in several projects that have varying capital requirements over the next four years. Faced with limited capital each year, management would like to select the most profitable projects. The estimated net present value for each project, the capital requirements, and the available capital over the four-year period are shown in Table below.
| Project | Plant Expansion | Warehouse Expansion | New Machinery | New Product Research | Total Capital Available | ||
| Present Value | $90,000 | $40,000 | $10,000 | $37,000 | |||
| Year 1 Cap Rqmt | $15,000 | $10,000 | $10,000 | $15,000 | $40,000 | ||
| Year 2 Cap Rqmt | $20,000 | $15,000 | - | $10,000 | $50,000 | ||
| Year 3 Cap Rqmt | $20,000 | $20,000 | - | $10,000 | $40,000 | ||
| Year 4 Cap Rqmt | $15,000 | $5,000 | $4,000 | $10,000 | $35,000 |
a. Formulate the problem as LP.
b. If these projects are mutually exclusive and the organization has no sufficient fund to finance all projects simultaneously, which project(s) should be selected to maximize the present value?
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Essentials Of Management Information Systems
Authors: Ken Laudon, Kenneth C Laudon
10th Edition
0133033090, 9780133033090
