Quantitative analysis: Integer programming.
Not what you're looking for?
See attached file.
Johnston Investments is considering a couple of investment possibilities. Each investment considered will draw on the capital account during each of its first 3 years. In the long run, each investment is predicted to have a positive NPV. Posted in the spreadsheet are the investment choices, its NPV's, and capital requirements. Amounts are in thousands of dollars. In addition, the amount of capital available to the investments in each of the next three years is predicted to be $12 million each year. The goal of Johnston Investments is to maximize the total NPV, which is the sum of NPV's of the investments chosen.
a) Assume that any combination of the investments is permitted, which ones should Perry choose to maximize NPV?
b) What is the value of the total NPV given by your answer in part a?
c) Suppose that the expansion investments (one-phase expansion and two-phase expansion) are mutually exclusive (i.e. only one of them can be made). How does this alter the solution in part a?
d) What is the value of the total NPV in part c?
e) *Ignore parts c and e in this question* Suppose that the test market cannot be carried out unless the advertising campaign is also adopted. Which investments should Johnston choose to maximize NPV given this extra condition?
f) What is the value of the total NPV in part e?
Purchase this Solution
Solution Summary
The problem set deals with using integer programming to maximize selected information with constraints.
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
Recent Feedback
- "Thank you."
- "thank you Chidi Ngene.. if you have any APA references would be great"
- "Thank you so much for your help, your explanations were easy to understand and apply!"
- "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
- "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"
Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Motivation
This tests some key elements of major motivation theories.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.