Capital Co

Multiple Choice

Capital Co. is considering which of five different projects to undertake in order to maximize its net present value (NPV) . Define X_i as a binary (0-1) variable that equals 1 if project i is undertaken and 0 otherwise, for i = 1,2,3,4,5. The NPV and required capital (in thousands) for each project are listed below.
Project Net Present Value Capital Required
1 60 7
2 50 10
3 40 6
4 20 3
5 30 12
Which of the following represents the constraint stating that project 1 can be undertaken only if project 5 is undertaken?

A) X₁ + X₅ ≤ 1
B) X₁ - X₅ ≤ 0
C) X₅ - X₁ ≤ 0
D) X₁ - X₅ ≤ 1
E) X₅ - X₁ ≤ 1