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Homework answers / question archive / Département de science économique Department of Economics ENGINEERING ECONOMICS ECO 1192B Blue Assignment #2: Capital Budgeting C
Département de science économique
Department of Economics
ENGINEERING ECONOMICS
ECO 1192B
Blue Assignment #2: Capital Budgeting
C.Theoret Winter 2021
Assignment Instructions
1. Completing an unallocated assignment will result in a zero (0%) score.
2. You will submit your assignment #2 answers on Brightspace on April 1 between 7 and 7:30 pm (Ottawa, Ontario time).
3. Assignment answers submitted late or by other means will be rejected.
4. The sequence of assignment questions in this document will be maintained on April 1 (i.e., no question scrambling)
5. Where appropriate
6. Please consult the appropriate Background Paper on Brightspace for assistance or seek assistance during my weekly office hour.
B. Problem Statement
The Delta Power Company is planning to invest in several of eight (8) projects.
Unfortunately, it faces a range of constraints such as budgetary, number of projects that it can supervise, and the relationship among projects (contingent and/or duplicative).
The Company is seeking your assistance in selecting the projects that will maximize its Net Present Worth given different sets of constraints.
All projects have the same lifespan.
|
Projects |
Initial Cost |
NPW |
|
A |
450,000 |
130,000 |
|
B |
375,000 |
85,000 |
|
C |
250,000 |
60,000 |
|
D |
400,000 |
80,000 |
|
E |
325,000 |
75,000 |
|
F |
475,000 |
90,000 |
|
G |
425,000 |
79,000 |
|
H |
390,000 |
95,000 |
|
MARR = 10% |
||
Questions 1 to 3
a) Budget = $2,000,000; MARR = 10%.
b) Use the NPW decision criterion to determine the “best” feasible bundle of independent projects.
1. The best investment bundle consists of projects
2. The NPW (§$) of the best investment bundle is
3. The total cost ($) of the best investment bundle is
Questions 4 to 6
a) Budget = $2,000,000; MARR = 10%.
b) A maximum of four (4) projects can be selected.
c) Individual projects must have a first (initial) cost > $350,000.
d) Use the NPW decision criterion to determine the “best” feasible bundle of independent projects.
4. The best investment bundle consists of projects
5. The NPW ($) of the best investment bundle is
6. The total cost ($) of the best investment bundle is
Questions 7 to 9
a) Budget = $1,800,000; MARR = 10%.
b) Projects B, F and H must be included in the best bundle.
c) A maximum of five (5) projects can be selected.
d) Use the NPW decision criterion to determine the “best” feasible bundle of independent projects.
7. The best investment bundle consists of projects
8. The NPW ($) of the best investment bundle is
9. The total cost ($) of the best investment bundle is
Questions 10 to 12
a) Budget = $1,700,000; MARR = 10%.
b) Projects A, D and G are duplicative. Select at most one project.
c) Projects B and E must be excluded from the best bundle.
d) Use the NPW decision criterion to determine the “best” feasible bundle of projects.
10. The best investment bundle consists of projects
11. The NPW ($) of the best investment bundle is
12. The total cost ($) of the best investment bundle is
Questions 13 to 15
a) Budget = $2,500,000; MARR = 10%.
b) Projects A, B and F must be selected.
c) Projects C, D and G overlap significantly. Select at most one project.
d) A maximum of five (5) projects must be selected.
e) Use the NPW decision criterion to determine the “best” feasible bundle of projects.
13. The best investment bundle consists of projects
14. The NPW ($) of the best investment bundle is
15. The total cost ($) of the best investment bundle is
Questions 16 to 19
a) Budget = $2,200,000; MARR=10%.
b) The selection of projects A or C is contingent on the selection of project H.
c) Projects B, D and G must be selected.
d) A maximum of five (5) projects can be selected.
e) Use the NPW decision criterion to determine the “best” feasible bundle of projects.
16. The best investment bundle consists of projects
17. The NPW ($) of the best investment bundle is
18. The total cost ($) of the best investment bundle is
19. Which project in the best bundle is ranked highest?
Questions 20 to 23
a) Budget = $2,300,000
b) Investing in project B is contingent on investing in all of D, E and F.
c) Investing in project C is contingent on investing in either A or G.
d) Projects A, C and G are mutually exclusive. Select at most one (1) project.
e) Use the NPW decision criterion to determine the “best” feasible bundle of projects.
20. The best investment bundle consists of projects.
21. The NPW ($) of the best investment bundle is
22. The total cost ($) of the best investment bundle is
23. Which project in the best bundle is ranked second highest?
Questions 24 to 26
a) Budget = $1,500,000
b) Investing in project A is contingent on investing in all of projects D, E and F.
c) Investing in project B is contingent on investing in at least two of C, G and H.
d) Projects C and H are mutually exclusive. Select at most one (1) project.
e) A maximum of three (3) projects can be selected.
f) Use the NPW decision criterion to determine the “best” feasible bundle of projects.
24. The best investment bundle consists of projects
25. The NPW ($) of the best investment bundle is
26. The total cost ($) of the best investment bundle is
Questions 27 to 30
a) Budget = $1,700,000; MARR = 10%.
b) Projects A, D and G are duplicative. Select at most one project.
c) Projects B and E must be excluded from the best bundle.
d) Project A is contingent on investing in all of projects E and F.
e) Use the NPW/P ratio to determine the “best” feasible bundle of projects.
27. Based on the Net Present Worth criterion, the best investment bundle consists of projects
28. Based on NPW/P ratios, the best investment bundle consists of projects
29. The NPW ($) of the best investment bundle based on the NPW criterion is
30. The NPW ($) of the best investment bundle based on NPW’P ratios is
