Project Combination

[Hadoushi]

Hi there everyone! This is my problem:

Given the following information for the following indivisible and independent projects (where c= cashflow):

c0 c1 c2 c3
A -200 200 -90 240
B -250 200 -40 250
C -300 100 400 -60
D -50 -400 350 390
E 300 200 200 -870
F -235 180 -150 390

and the following constraints:
1. Cost (Cash flow) must be >-550
2. Cash flow in period one must be >200
3. Cash flow in period three must be >-400
4 Cash inflow in period two must be >300 and <500

Without the use of solver, which combinations of projects will yield the highest NPV, if the required rate of return is 10%?
The invester can choose as many projects as the funding and cash flow will allow.

[Richard Buttrey]

Hi,

Assuming constraint 1 is the total cashflow for 4 periods then non of the projects pass that first hurdle.
In fact there are no projects where all four constraints are met.


If you're looking for the highest NPV why would you choose anything but the project with the highest NPV? Or putting it another way insisting on choosing combinations of projects, (assuming their cash flows are different) will not maximise the NPV.

Or am I missing something?

And just as a matter of interest why would you not use solver? Without that macro code is going to be needed. I can't think of any simple Excel functionality that would handle it.

[Hadoushi]

Hi,

Assuming constraint 1 is the total cashflow for 4 periods then non of the projects pass that first hurdle.
In fact there are no projects where all four constraints are met.


If you're looking for the highest NPV why would you choose anything but the project with the highest NPV? Or putting it another way insisting on choosing combinations of projects, (assuming their cash flows are different) will not maximise the NPV.

Or am I missing something?

And just as a matter of interest why would you not use solver? Without that macro code is going to be needed. I can't think of any simple Excel functionality that would handle it.

A combination of projects will give different cashflows, at different times. some have early inflows and late outflows, with some just the converse. this should affect the NPV.

the cost is seen in C0, the initial outflow. For combining A and B, for example would cost me -450 (-250+-250). -450 is greater than - 550, so I can go ahead, based on constraint one.

I am not allowed to use solver, each combination must be shown clearly.