brianabrady06
21.05.2020 •
Business
The owners of the company have raised $30 million of investment capital for these projects. They now want to select the combination of projects that will maximize their total estimated long-run pro t without investing more than $30 million. There are three other restrictions: 1) if both project 1 and project 3 are selected, then project 5 cannot be selected; 2) project 2 can only be selected if project 4 is selected; 3) if project 3 is selected, then at least one of project 1 or project 4 should be selected. Formulate this problem as a binary integer program. Write explicitly what the decision variables are, what the objective function is, and what the constraints are. Remark: In your solution, please underline the key elements like below, and write your answers in the corresponding places (can enlarge the spacing between the elements in your solution).
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Ответ:
Net Present Value = $12,400
Since net present value is positive, the investment shall be made.
Explanation:
Capital outlay = $216,758
Cash inflow every year = $43,900
Period = 10 Years
Net Present Value = Present value of cash inflow - Present value of cash outflow
Present Value of Cash Inflow = Cash inflow each year X Present value factor of cash inflows for years
= $43,900 X 5.22
= $229,158
Present value of cash outflow = $216,758
Net Present Value = $229,158 - $216,758 = $12,400
Since net present value is positive, the investment shall be made.
Net Present Value measures the net effect of an investment discounted at current rate of interest, i.e. cost of capital.
Final Answer
Net Present Value = $12,400
Since net present value is positive, the investment shall be made.