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- This topic has 1 reply, 2 voices, and was last updated 10 months ago by John Moffat.
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- January 16, 2024 at 4:27 pm #698443
Hi Sir,
Following the example in your lecture on DCF linear programming where the amount of deposit at Time 0 is subject to the constraint of P >=0 , for completeness shouldn’t P also be constrained to P<= $14,000? As it is technically possible to not invest in any of the a, b or c projects at Time 0, and earning a deposit interest of 7% on the deposit (despite the loss due to the 10% cost of capital) in order to have more funds available Time 1? I am aware it doesn’t make commercial sense but mathematically this seems to satisfy all the constraints?
And perhaps it might be worthwhile if the investment capital required at Time 1 for the projects were much more than those illustrated in the example?
Thanks in advance for your guidance.
Regards,
TimJanuary 17, 2024 at 8:41 am #698476The constraint is already there – it is there as a result of the other constraints and to show it separately would be redundant.
Why would the capital required being more be worthwhile? The logic in the approach required in the exam would not be any different.
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