Capital Co

question 116

Multiple Choice

Capital Co. is considering which of five different projects to undertake in order to maximize its net present value (NPV) . Define X_i as a binary (0-1) variable that equals 1 if project i is undertaken and 0 otherwise, for i = 1,2,3,4,5. The NPV and required capital (in thousands) for each project are listed below.
Project Net Present Value Capital Required
1 60 7
2 50 10
3 40 6
4 20 3
5 30 12
Which of the following represents the constraint stating that project 1 can be undertaken only if project 5 is undertaken?

• A) X₁ + X₅ ≤ 1
• B) X₁ - X₅ ≤ 0
• C) X₅ - X₁ ≤ 0
• D) X₁ - X₅ ≤ 1
• E) X₅ - X₁ ≤ 1

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Definitions:

Desired Amount

The specific sum of money or financial goal an individual or entity aims to achieve.

Monthly Rate

The interest rate or other fees assessed on a monthly basis, often used in loans and financial agreements.

Student Loan

A loan offered to students which is used to pay off educational expenses and is repayable after graduation, typically with interest.

Withdraw

To remove funds from a bank account or investment, or to retract from participation in an activity or agreement.