Saudi Electronic University Capital Budgeting Problem Questions
Question Description
I’m working on a management question and need an explanation and answer to help me learn.
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Q. Explain the Capital Budgeting Problem
Q. Describe the Set Covering Problem.
100 WORDS FOR EACH Q
THIS THE ANSWER FOR HELP U
1- ompanies, committees, and even households often find themselves facing a
problem of allocating a capital budget. s the problem arises in many firms, there is
a specified budget for the year, to be invested in multi-year projects. here are
typically several proposed projects under consideration. he challenge is to
determine how to maximize the value of the projects selected, subject to the limitation
on expenditures represented by the capital budget.
In the classic version of the capital budgeting problem, each project is described by
two values: the expenditure required and the value of the project. s a project is
typically a multi-year activity, its value is represented by the net present value (NPV)
of its cash flows over the project life. he expenditure, combined with the
expenditures of other projects selected, cannot be more than the budget available.
2- he set covering problem is a variation of the covering model in which the
variables are all binary. n addition, the parameters in the constraints are all zeroes
and ones. n the classic version of the set covering problem, each project is
described by a subset of locations that it ïvers. The problem is to cover all
locations with a minimal number of projects.
References:
Powell, S. G., & Baker, K. R. (2014). Management science: The art of modeling with
spreadsheets (4th ed.). Wiley. ISBN: 9781118582695 (print version); ISBN:
9781118801314 (E-copy)
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