Q2: Problem 8: Capital Budgeting – 0,1 variable Spencer Enterprises must choose among a series of...

Q2: Problem 8: Capital Budgeting – 0,1 variable

Spencer Enterprises must 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:

Alternative	Net Present Value ($)	Capital Requirements ($)
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

Please develop and solve an integer programming model for maximizing the net present value.

Expert Solution

Answer: ----- Date: ----23/3/2020

orchestra answered 1 year ago

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