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Solve the following modifications of the capital budgeting model in Figure 6.5. (Solve each part independently of the others.) a. Suppose that at most two of projects 3, 5, and 6 can be selected. b. Suppose that if investment 5 is selected, then investment 1 must also be selected. c. Suppose that at least one of investments 1 and 2 must be selected. d. Suppose that investment 5 can be selected only if both investments 3 and 4 are selected.

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Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659

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Chapter
Section
BuyFindarrow_forward

Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659
Chapter 6.3, Problem 4P
Textbook Problem
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Solve the following modifications of the capital budgeting model in Figure 6.5. (Solve each part independently of the others.)

  1. a. Suppose that at most two of projects 3, 5, and 6 can be selected.
  2. b. Suppose that if investment 5 is selected, then investment 1 must also be selected.
  3. c. Suppose that at least one of investments 1 and 2 must be selected.
  4. d. Suppose that investment 5 can be selected only if both investments 3 and 4 are selected.

a)

Summary Introduction

To modify: The capital budgeting model if most of two projects 3, 5, and 6 can be selected.

Introduction: The variation between the present value of the cash outflows and the present value of the cash inflows are known as the Net Present Value (NPV).

Explanation of Solution

Model:

Formulae to determine the model:

b)

Summary Introduction

To modify: The capital budgeting model if investment 5 and 1 is selected.

Introduction: The variation between the present value of the cash outflows and the present value of the cash inflows are known as the Net Present Value (NPV).

c)

Summary Introduction

To modify: The capital budgeting model if one of investments 1 and 2 are selected.

Introduction: The variation between the present value of the cash outflows and the present value of the cash inflows are known as the Net Present Value (NPV).

d)

Summary Introduction

To modify: The capital budgeting model if investment 5, 3,and 4 are selected.

Introduction: The variation between the present value of the cash outflows and the present value of the cash inflows are known as the Net Present Value (NPV).

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Practical Management Science
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