Question
The board of directors of General Wheels Company is considering seven large capital investments. Each investment can be made only once. These investments differ in
The board of directors of General Wheels Company is considering seven large capital investments. Each investment can be made only once. These investments differ in the estimated long-run profit (net present value) that they will generate as well as in the amount of capital required, as shown by the following table.
Investment Opportunity | |||||||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | |||||
Estimated Profit | 17 | 10 | 15 | 19 | 7 | 13 | 9 | ||||
($million) | Capital | ||||||||||
Capital Required for Investment Opportunity ($million) | Available | ||||||||||
Capital | 43 | 28 | 34 | 48 | 17 | 32 | 23 | 100 | |||
The total amount of capital available for these investments is $100 million. Investment opportunities 1 and 2 are mutually exclusive, and so are 3 and 4. Furthermore, neither 3 nor 4 can be undertaken unless one of the first two opportunities is undertaken. There are no such restrictions on investment opportunities 5, 6, and 7. The objective is to select the combination of capital investments that will maximize the total estimated long-run profit (net present value).
Formulate and solve a BIP model on a spreadsheet for this problem.
Determine the combination of capital investments that will maximize profit.
Note: Leave no cells blank. Enter "0" wherever required.
Undertake? Enter 1if yes and 0 is no
Investment Opportunity 1
Investment Opportunity 2
Investment Opportunity 3
Investment Opportunity 4
Investment Opportunity 5
Investment Opportunity 6
Investment Opportunity 7
Determine the total profit.
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