Question
Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream
Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows:
| Capital Requirements ($) | |||||||||
| Alternative | Net Present Value ($) | Year 1 | Year 2 | Year 3 | |||||
| Limited warehouse expansion | 4,000 | 3,000 | 1,000 | 4,000 | |||||
| Extensive warehouse expansion | 6,000 | 2,500 | 3,500 | 3,500 | |||||
| Test market new product | 10,500 | 6,000 | 4,000 | 5,000 | |||||
| Advertising campaign | 4,000 | 2,000 | 1,500 | 1,800 | |||||
| Basic research | 8,000 | 5,000 | 1,000 | 4,000 | |||||
| Purchase new equipment | 3,000 | 1,000 | 500 | 900 | |||||
| Capital funds available | 10,500 | 7,000 | 8,750 | ||||||
| (a) | Develop and solve an integer programming model for maximizing the net present value. | |||||||||||||
| Max | x1 | + | x2 | + | x3 | + | x4 | + | x5 | + | x6 | |||
| s.t. | ||||||||||||||
| x1 | + | x2 | + | x3 | + | x4 | + | x5 | + | x6 | ||||
|
| Year 1 | |||||||||||
| x1 | + | x2 | + | x3 | + | x4 | + | x5 | + | x6 |
|
| Year 2 | |||||||||||
| x1 | + | x2 | + | x3 | + | x4 | + | x5 | + | x6 |
|
| Year 3 | |||||||||||
| x1, x2, x3, x4, x5, x6 |
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Economics Of Money Banking And Financial Markets
Authors: Frederic Mishkin
5th Edition
0134734203, 978-0134734200
