questions_quiz1_S08

questions_quiz1_S08 - THE INVESTMENTS OF RONALD THUMP A....

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Page 3 of 10 THE INVESTMENTS OF RONALD THUMP A. Being perennially pro-growth, Ronald Thump is interested in expanding his firm. After careful consideration, he has determined two areas in which he might invest additional funds: (1) advertising and sales promotion (2) manufacturing and operations improvements Right now, at the beginning of year 1, Ronald has $500,000 available for investment in the firm. Any funds invested in its advertising and sales promotion program are expected to yield a return of the amount invested plus 20% after one year and will become available for reinvestment after one year . Any funds invested in manufacturing and operations improvements are expected to yield a return of the amount invested plus 30% after two years and will become available to Ronald after two years . That is, at the end of year 1, Ronald will not have access to any funds invested in manufacturing and operations improvements that he made at the beginning of year 1. Ronald also wishes to include the requirement that, in each year, at least $60,000 must be invested in the advertising and sales promotion program, and, in year 1, at least $80,000 must be invested in manufacturing and operations improvement. Ronald wants to know how much should be invested in each of the two alternatives at the beginning of years 1 and 2, to maximize the total ending cash
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questions_quiz1_S08 - THE INVESTMENTS OF RONALD THUMP A....

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