A company is planning its capital budget over the next several years. There areeight potential projects under consideration. A calculation has been made of the expected netpresent value of each project, along with the cash outflow that would be required over the nextfour years. These data, along with the cash that is available each year, are shown in the tablebelow. (If any of the cash available in a given year is not fully used for these projects, it willbe used in other ways and so will not be available in later years.) There also are the followingspecial constraints: (a) at least one of project 1, 2, or 3 must be done, (b) project 6 and 7cannot both be done, and (c) project 5 can only be done if project 6 is done. The objective isto determine which projects should be pursued to maximize the total expected net presentvalue.Year 1Year 2Year 3Year 4NPV(Smil)Cash Outflow Required (Smillion)Project121322232110 123560372234233054211 15 24 1730433222Formulate a BIP model in algebraic form for this problem72361168∞542542218CashAvailable(Smillion)20202020

BIP stands for Binary Integer programming. It isa special case of LPP wherein the decision variable…

Answered: A company is planning its capital…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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West Company’s contribution format income statement for March 2020 is givenbelow:Sales (15,000 units X $30 per unit) $450,000Variable expenses 315,000Contribution margin 135,000Fixed expenses 90,000Net operating income $ 45,000The industry in which West Company operates is quite sensitive to regularmovements in the economy. Thus, profits vary considerably from year to yearaccording to general economic conditions. The company has a large amount ofunused capacity and is studying ways of improving profits.Required:The company CEO has asked you as a Senior Manager to evaluate the belowsituations with recommendations:1- New equipment has come onto the market that would allow WestCompany to automate a portion of its operations. Variable expenseswould be reduced by $9 per unit. However, fixed expenses wouldincrease to a total of $225,000 each month. How Net Income wouldappear if the new equipment were purchased. As a Senior Manager,what factor/s would be paramount in your mind deciding…
Conoly Co. has identified an investment projectwith the following cash flows. If the discount rate is 10 percent, what is the present valueof these cash flows? What is the present value at 18 percent? At 24 percent?Year Cash Flow1 $ 9602 8403 9354 1,350
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