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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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