Riker Co Is Considering Which of 4 Different Projects to Undertake

question 87

Multiple Choice

Riker Co. is considering which of 4 different projects to undertake in order to maximize its net present value (NPV) . Define X_i as a binary variable that equals 1 if project i is undertaken and 0 otherwise, for i = 1, 2, 3, 4. The NPV and required capital (in millions) for each project are listed below. What is the proper objective function?

• A) Max X₁ + X₂ + X₃ + X₄
• B) Min 60X₁ + 50X₂ + 40X₃ + 20X₄
• C) Max 60X₁ + 50X₂ + 40X₃ + 20X₄
• D) Max 7X₁ + 10X₂ + 6X₃ + 3X₄
• E) Max 170(X₁ + X₂ + X₃ + X₄)

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Definitions:

Mean

The average of a set of numbers, calculated by dividing the sum of all values by the quantity of values.

Bell Shaped Distribution

Also known as a normal distribution, it is a probability distribution that has a symmetrical bell-shaped graph, indicating that most of the data points are concentrated around the mean.

Supply And Demand

Fundamental economic principles that describe the relationship between the availability of a product or service (supply) and the desire of potential buyers (demand).

Bell Shaped Distribution

A probability distribution that is symmetrical and tapers towards the tails, resembling a bell; commonly known as the normal distribution.