Problem

A company has nine projects under consideration. The NPV added by each project and the cap...

A company has nine projects under consideration. The NPV added by each project and the capital required by each project during the next two years is given in Table 9. All figures are in millions. For example. Project 1 will add $14 million in NPV and require expenditures of $12 million during year 1 and $3 million during year 2. Fifty million is available for projects during year 1 and $20 million is available during year 2. Assuming we may undertake a fraction of each project, how can we maximize NPV?

TABLE 9

 

Project

 

1

2

3

4

5

6

7

8

9

Year 1 Outflow

12

54

  6

  6

30

  6

48

36

18

Year 2 Outflow

  3

  7

  6

  2

35

  6

  4

  3

  3

NPV

14

17

17

15

40

12

14

10

12

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Solutions For Problems in Chapter 3.6