A Hunger-Relief Organization Has Earmarked Between $2 and $2

question 201

Multiple Choice

A hunger-relief organization has earmarked between $2 and $2.5 million, inclusive, for aid to two African countries, country A and country B. Country A is to receive between $1 and $1.5 million, inclusive, in aid, and country B is to receive at least $0.75 million in aid. It has been estimated that each dollar spent in country A will yield an effective return of $.75, whereas a dollar spent in country B will yield an effective return of $.85. How should the aid be allocated if the money is to be utilized most effectively according to these criteria? (Hint: If x and y denote the amount of money to be given to country A and country B, respectively, then the objective function to be maximized is P = 0.75x + 0.85y.)

• A) $1 million to country A and $1.5 million to country B
• B) $1.5 million to country A and $1 million to country B
• C) $2 million to country A and $0.5 million to country B
• D) $0.5 million to country A and $2 million to country B

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Definitions:

Fair Value

The estimated market price of an asset or liability, reflecting current market conditions.

Par Value

A nominal value or face value assigned to a share of stock by the company’s charter.

Acquisition Method

The accounting method used to consolidate the financial statements of a parent company and its acquired subsidiary.

Business Combinations

Occurs when one company acquires control over another, either through the purchase of shares, assets, or a merger.