Q1. A software development company is trying to determine which of 20 software projects it should undertake.

The N
contributed by each project as well as the capital (in millions of dollars) and the number of programmers needed duri
is given in the table below. For example, Project 2 yields $908 million. It requires $151 million during Year 1, $269 mill
million during Year 3. Project 2 requires 139 programmers during Year 1, 86 programmers during Year 2, and 83 progr
Year 1 up to $2.5 billion in capital and 900 programmers are available.If you can’t undertake a fraction of a project, Wh
company undertake to maximize the NPV?

Total NPV
($ MN)
9293 2460 2684 2742 876

Available 2500 2800 2900 900

NPV Year 1 Year 2 Year 3 Year 1
Do IT? Options
($ MN) Cost ($ MN) Cost ($ MN) Cost ($ MN) Developers
0 Project 1 928 398 180 368 111
1 Project 2 908 151 269 248 139
1 Project 3 801 129 189 308 56
0 Project 4 543 275 218 220 54
0 Project 5 944 291 252 228 123
1 Project 6 848 80 283 285 119
1 Project 7 545 203 220 77 54
1 Project 8 808 150 113 143 67
1 Project 9 638 282 141 160 37
1 Project 10 841 214 254 355 130
0 Project 11 664 224 271 130 51
0 Project 12 546 225 150 33 35
0 Project 13 699 101 218 272 43
1 Project 14 599 255 202 70 3
1 Project 15 903 228 351 240 60
1 Project 16 859 303 173 431 60
0 Project 17 748 133 427 220 59
0 Project 18 668 197 98 214 95
1 Project 19 888 313 278 291 66
1 Project 20 655 152 211 134 85
projects it should undertake. The NPV (in millions of dollars)
umber of programmers needed during each of the next three years
151 million during Year 1, $269 million during Year 2, and $248
ammers during Year 2, and 83 programmers during Year 3. During
undertake a fraction of a project, Which projects should the

895 702

900 900
Year 2 Year 3
Developers Developers
108 123
86 83
61 23
70 59
141 70
84 37
44 42
101 43
55 64
72 62
79 58
107 63
90 71
75 83
93 80
90 41
40 39
96 74
75 74
59 70
Q2. Continuation of Q1. Software Dev Company need to ensure that either it will take up both Projects 3 & 4 or None o
and 4 are inter-dependent and need to be taken together. If company can’t undertake a fraction of a project, Which pro
undertake to maximize the NPV?

Total NPV
($ MN)
9136 2437 2758 2865 875

Available 2500 2800 2900 900

NPV Year 1 Year 2 Year 3 Year 1
Do IT? Options
($ MN) Cost ($ MN) Cost ($ MN) Cost ($ MN) Developers
0 Project 1 928 398 180 368 111
1 Project 2 908 151 269 248 139
1 Project 3 801 129 189 308 56
1 Project 4 543 275 218 220 54
0 Project 5 944 291 252 228 123
1 Project 6 848 80 283 285 119
0 Project 7 545 203 220 77 54
1 Project 8 808 150 113 143 67
1 Project 9 638 282 141 160 37
1 Project 10 841 214 254 355 130
0 Project 11 664 224 271 130 51
0 Project 12 546 225 150 33 35
0 Project 13 699 101 218 272 43
1 Project 14 599 255 202 70 3
0 Project 15 903 228 351 240 60
1 Project 16 859 303 173 431 60
1 Project 17 748 133 427 220 59
0 Project 18 668 197 98 214 95
1 Project 19 888 313 278 291 66
1 Project 20 655 152 211 134 85
ke up both Projects 3 & 4 or None of them. That means, Project 3
ke a fraction of a project, Which projects should the company

868 678

900 900
Year 2 Year 3
Developers Developers
108 123
86 83
61 23
70 59
141 70
84 37
44 42
101 43
55 64
72 62
79 58
107 63
90 71
75 83
93 80
90 41
40 39
96 74
75 74
59 70
Q3. Continuation of Q1. Software Dev Company need to ensure that either it will take up Projects 9, 10, and 11 togethe
means, Projects 9, 10, and 11 are inter-dependent and need to be taken together. If company can’t undertake a fractio
should the company undertake to maximize the NPV?

Total NPV
($ MN)
9211 2456 2798 2854 854

Available 2500 2800 2900 900

NPV Year 1 Year 2 Year 3 Year 1
Do IT? Options
($ MN) Cost ($ MN) Cost ($ MN) Cost ($ MN) Developers
0 Project 1 928 398 180 368 111
0 Project 2 908 151 269 248 139
1 Project 3 801 129 189 308 56
0 Project 4 543 275 218 220 54
0 Project 5 944 291 252 228 123
1 Project 6 848 80 283 285 119
1 Project 7 545 203 220 77 54
1 Project 8 808 150 113 143 67
1 Project 9 638 282 141 160 37
1 Project 10 841 214 254 355 130
1 Project 11 664 224 271 130 51
0 Project 12 546 225 150 33 35
0 Project 13 699 101 218 272 43
0 Project 14 599 255 202 70 3
1 Project 15 903 228 351 240 60
1 Project 16 859 303 173 431 60
1 Project 17 748 133 427 220 59
1 Project 18 668 197 98 214 95
1 Project 19 888 313 278 291 66
0 Project 20 655 152 211 134 85
 ke up Projects 9, 10, and 11 together or None of them. That
f company can’t undertake a fraction of a project, Which projects

890 637

900 900
Year 2 Year 3
Developers Developers
108 123
86 83
61 23
70 59
141 70
84 37
44 42
101 43
55 64
72 62
79 58
107 63
90 71
75 83
93 80
90 41
40 39
96 74
75 74
59 70
Q3. Continuation of Q1. Software Dev Company can only undertake a maximum of 4 projects at a time among Projects
skills requirement. If company can’t undertake a fraction of a project, Which projects should the company undertake

Total NPV
($ MN)
8798 2473 2632 2879 864

Available 2500 2800 2900 900

NPV Year 1 Year 2 Year 3 Year 1
Do IT? Options
($ MN) Cost ($ MN) Cost ($ MN) Cost ($ MN) Developers
1 Project 1 928 398 180 368 111
1 Project 2 908 151 269 248 139
1 Project 3 801 129 189 308 56
0 Project 4 543 275 218 220 54
0 Project 5 944 291 252 228 123
0 Project 6 848 80 283 285 119
0 Project 7 545 203 220 77 54
0 Project 8 808 150 113 143 67
0 Project 9 638 282 141 160 37
1 Project 10 841 214 254 355 130
0 Project 11 664 224 271 130 51
0 Project 12 546 225 150 33 35
0 Project 13 699 101 218 272 43
1 Project 14 599 255 202 70 3
1 Project 15 903 228 351 240 60
1 Project 16 859 303 173 431 60
1 Project 17 748 133 427 220 59
1 Project 18 668 197 98 214 95
1 Project 19 888 313 278 291 66
1 Project 20 655 152 211 134 85
4 projects at a time among Projects 1 to 10 due to niche technology
cts should the company undertake to maximize the NPV?

855 752

900 900
Year 2 Year 3
Developers Developers
108 123
86 83
61 23 4
70 59
141 70
84 37
44 42
101 43
55 64
72 62
79 58
107 63
90 71
75 83
93 80
90 41
40 39
96 74
75 74
59 70