Determine how much investment and debt to undertake


I have to determine how much investment and debt to undertake during the next year. Each dollar invested reduces the NPV of my company by 10 cents, and each dollar of debt increases the NPV by 50 cents (due to deductibility of interest payments). I can invest at most $1 million during the coming year. Debt can be at most 40% of investment. I now have $800,000.00 in cash available. All investment must be paid for from current cash or borrowed money. Set up an Linear Programming (LP) whose solution will tell me how to maximize its NPV. Then graphically solve the LP

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Operation Management: Determine how much investment and debt to undertake
Reference No:- TGS082966

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