Series of new investment alternatives

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Reference no: EM132195694

Spencer Enterprises is attempting to 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.

Capital Requirements ($) Alternative NPV ($) 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

Develop and solve a binary programming model for maximizing the net present value.

In addition, ensure that the following two logical constraints are modeled.

• Assume that only one of the warehouse expansion projects can be implemented.

• Finally, suppose that if the test marketing of the new product is carried out, the advertising campaign also must be conducted.

Reference no: EM132195694

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