Question: Under consideration are five development projects. The cash outflows that would be required to complete each project are shown in the table below, as well as the expected net present value (NPV) of each project. Note that all values are in millions of dollars. Each project must be done in full, with the four years’ cash flows, or not done at all; it is not possible to do a fraction of a project. This means that the variables must be restricted to binary. The development company expects to have the following cash available to invest in these projects: $40 million for year 1, $25 million for year 2, $16 million for year 3, and $12 million for year 4. Any available money not spent in a given year is then available to spend the following year. The objective is to choose the set of projects that will maximize the total expected net present value.

1. Write out the algebraic equations to formulate this problem.
2. Set up the problem in excel solver and find the optimal solution.
3. Write out the algebraic equations to add to your formulation in part a to include the following two considerations (you do not need to resolve the problem with these constraints):

 Project 1 cannot be done unless Project 2 is also done.

 Projects 3 and 4 would compete with each other so they should not both be chosen.

Price: $2.99

Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document