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:

Gross Earnings

The total amount of money earned by an individual or a company before any deductions or taxes are applied.

Taxable Income

The amount of an individual's or a corporation's income used to determine how much tax is owed to the government.

Withholding Allowance

A tax term referring to an exemption that reduces how much income tax an employer deducts from an employee's paycheck.

Monthly Salary

Regular payment from an employer to an employee, typically provided once a month, for the services rendered by the employee.