Solve the capital budgeting problem in Problem 12.21(a) using the linear programming model and a spreadsheet.
Problem 12.21
A capital-budgeting problem is defined as follows: three projects are to be evaluated at a MARR of 12.5% per year. No more than $3.0 million can be invested.
(a) Use a spreadsheet to select from the independent projects.
(b) After some study, it was determined that the life of project 3 can be increased from 5 to 8 years for the same $1 million investment; however, the estimated annual NCF would remain steady from year 5 on. Use Goal Seek to determine the NCF in year 1 and beyond for project 3 (as a bundle of one project) to have the same PW as the best bundle in part (a). All other estimates remain the same. With these new NCF and life estimates, what are the best projects for investment?
 FIGURE 1.png)
Enter the NCF values from Problem 12.21 into the capital budgeting template and a constraint of b = $3,000,000 into Solver. Select projects 1 and 2 for Z = $199,496 with all $3 million invested.
 ANSWER.png)
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