A firm is considering the development of severalnew products. The products under consideration are listed in the next table. Products in each group are mutually exclusive.
At most, one product from each group will be selected. The firm has a MARR of 10% per year and a budget limitation on development costs of $2,100,000.
The life of all products is assumed to be 10 years, with no salvage value. Formulate this capital allocation problem as a linear integer programming model.
|
|
|
Development
|
Annual Net Cash
|
|
Group
|
Product
|
Cost
|
Income
|
|
!
|
A1
|
$500,000
|
$90,000
|
|
A
|
A2
|
650,000
|
110,000
|
|
A3
|
700,000
|
115,000
|
|
B
|
"
|
B1
|
600,000
|
105,000
|
|
B2
|
675,000
|
112,000
|
|
C
|
"
|
C1
|
800,000
|
150,000
|
|
C2
|
1,000,000
|
175,000
|