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The board of directors of General Wheels Co. is considering seven large capital investments. These investments differ in the estimated long-run profit (NPV) that they
The board of directors of General Wheels Co. is considering seven large capital investments. These investments differ in the estimated long-run profit (NPV) that they will generate as well as in the amount of capital required, as shown by the following table. Investment Opportunity Estimated Profit (millions) Capital Required (millions) A $17 $43 B 10 28 C 15 34 D 19 48 E 7 17 F 13 32 G 9 23 The total amount of capital available for these investments is $100 million. Investment opportunities A and B are mutually exclusive, and so are C and D. Furthermore, neither Cnor D can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities E, F, and G. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (NPV). Formulate the model on a spread and solve using Solver. Give the following: i. Objective function: Maximize NPV = ii. Optimal combination of investment opportunities (use comma as separator; ex: A, B, E, F): Investment/s iii. Optimum NPV: $ millions
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