You are on page 1of 2

HART VENTURE CAPITAL

Hart Venture Capital has two Investment opprtunities:-

1. Security Systems.

2. Market Analysis.

HVC want to maximize their Net Present Value by investing in these two projects.
The year wise requirement of funds for these two projects are given below:-

Project Name 1st Year 2nd Year 3rd Year


Security System 6 6 2.5
Market Analysis 5 3.5 4
Note:-All the figures are in Lac (’00,000 $)

At the 8% Rate of Return,


The Net Present Value for Security System is 1,800,000.
The Net Present Value for Market Analysis is 1,600,000.

The Total Budget limitations of HVC for three years are 800,000, 700,000 & 500,000
respectively.

Let X1=% of total amount invested in System Securities.


And X2=% of total amount invested in Market Analysis.
Then, the Objective Function is (maximize) Z=18X1+16X2.
Subject to :-
6X1+5X2 ≤ 8
6X1+3.5X2 ≤ 7
2.5X1+4X2 ≤ 5
X1+X2=1
X1, X2 ≥ 0

By solving the above problem through Management Scientist, the solution obtained
is given below:-
• X1=100%
X2=0%.
The Net Present Value of the Investment is 18 Lac.
• The Capital allocation for Security System is “6 lac $ for 1st year”, “6 lac $ for
2nd year” & “2.5 lac $ for 3rd year”.
For HVC, total investment for 1st year is “6 lac $ for 1st year”, “6 lac $ for 2nd
year” & “2.5 lac $ for 3rd year”.
• On adding an additional amount of 1 lac $ for the 1 st year, there will be “no
change in capital allocation”. Hence, the capital allocation & total investment
will remain same as in the previous solution.
• The New Capital allocation for Security System is “6 lac $ for 1 st year”, “6 lac
$ for 2nd year” & “2.5 lac $ for 3rd year”.
• HVC should not commit an additional 1 lac $ in the first year.

Presented by Group-10.
Suresh Vaghasiya, Tarun Chaudhary, Tushar Deshmukh, Vikram Deshmukh, Vinay
Panwar, Vishnu Mangal, Yogendra Rathod.