Make up an example, as described in Problem 7, with 20 possible investments. However, do it so the ratios of NPV to cash requirement are in a very tight range, from 3 to 3.2. Then use Solver to find...


Make up an example, as described in Problem 7, with 20 possible investments. However, do it so the ratios of NPV to cash requirement are in a very tight range, from 3 to 3.2. Then use Solver to find the optimal 6.4 Fixed-Cost Models 297 solution when the Solver tolerance is set to its default value of 5%, and record the solution. Next, solve again with the tolerance set to 0%. Do you get the same solution? Try this on a few more instances of the model, where you keep tinkering with the inputs. The question is whether the tolerance matters in these types of “close call” problem



May 25, 2022
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