Northwest California Ventures Ltd

question 21

Essay

Northwest California Ventures Ltd. has decided to provide capital in five market areas for the start-ups. The investment consultant for the venture capital company has projected an annual rate of return based on the market risk, the product, and the size of the market.

The maximum capital provided will be $5 million.
The consultant has imposed conditions on allotment of capital based on the risk involved in the market.
• The capital provided to retail should be at most 40 percent of the total capital.
• The capital for education should be 26 percent of the total of other four markets (Electronics, Software, Logistics, and Retail)
• Logistics should be at least 15 percent of the total capital.
• The capital allocated for Software plus Logistics should be no more than the capital allotted for Electronics.
• The capital allocated for Logistics plus Education should not be greater than that allocated to Retail.
Calculate the expected annual rate of return based on the allocation of capital to each market area to maximize the return on capital provided. Also, show the allocation of capital for each market area.

---

Definitions:

Type I Error

A statistical error occurring when a true null hypothesis is incorrectly rejected.

Type II Error

The error that occurs when a false null hypothesis is not rejected, meaning a true effect is missed.

Collecting Data

The process of gathering and measuring information on variables of interest in an systematic fashion that enables one to answer stated research questions, test hypotheses, and evaluate outcomes.

Effect Size

A metric that quantifies the extent of an event or the force of association among variables.