Q week 7
amorabito
homework_4.pdf
Homework 4
1. The Samsung is considering taking part in one or more of tree different development
projects – A, B, and C – that are about to be launched. Each project requires a significant
investment over the next few year, and then would be sold upon completion. The
projected cash flows (in millions of dollars) associated with each project are shown in the
table below.
Year Project A Project B Project C
1
2
3
4
5
6
-4.5
-6.8
-6.3
21
0
0
-6
-8
-3
-2
25
0
-14
-8
-8
-7
-4
38
Samsung has $10 million available now and expects to receive $6 million from other
projects by the end of each year (1 through 6) that would be available for the ongoing
investments the following year in projects A, B, and C. By acting now, the company may
participate in each project either fully, fractionally (with other development partners), or
not at all. If Samsung participates at less than 100 percent, then all the cash flows
associated with that project are reduced proportionally. Company policy requires ending
each year with a cash balance of at least $2 million.
a. Solve this model using Excel Solver (keep in mind that you must set up a linear
programming model in Excel Solver). In other words, what would be the (1)
maximum ending balance, and (2) optimal level of participation rate for each project?
Explain using at least 250 words.
b. How would the results in part a change if Samsung has $11 million available now and
expects to receive $7 million from other projects by the end of each year? In other
words, what would be the maximum ending balance and optimal level of participation
rate for each project in a new situation?
(Now, you must run a new linear programming model by replacing $10 million
(current starting balance) by $11 million (new starting balance) and $6 million
(current value of other project) by $7 million (new value of other project). Explain
using at least 250 words, focusing on why the participation rates in part b is different
from those in part a.
2. Discuss biblical principles that could be related to concepts or theory you learned from
this chapter, using at least 100 words. (This is an open-ended question, and there is no
definite answer)
