Problem 2.
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# Problem 2. (Capital Budgeting) The operating manager at a pharmaceutical

company is considering funding proposals for eight different research and development (R&D) projects, but she has limited funds C(C = \$1,000.00). The cost of investing in Project į is ci and bi is the estimated present value of benefit of Project i, as shown in the following table. Benefits (PV) Benefit/Cost Ratio Project Cost \$950.00 \$780.00 \$440.00 \$215.00 \$630.00 \$490.00 \$560.00 \$600.00 2.38 2.23 2.20 2.15 2.10 1.96 1.87 1.71 1 2 3 4 5 6 7 8 \$400.00 \$300.00 \$200.00 \$100.00 \$300.00 \$250.00 \$300.00 \$350.00 Each project is on a "take it or leave it" basis, that is, it is not possible to fund a project partially. Which projects should the operating manager fund in order to maximize the present value of the expected total benefit?

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