Information Technology for Managers (IM 501)

PGDM (Executive) 2021-22

ASSIGNMENT
Due Date: July 31st, 2020 by 5 pm
Max Marks: 75

Instructions:

 Do the following exercises and save the output files in the Assignment folder.
 Login in OLT web and select the radio button Assignment Folder.
 In the faculty listing select the Faculty “Himanshu”
 Browse for your output file and click the upload button.
 Before uploading ensure that you have the saved the files with your group-no followed
by the assignment number. For example if your group number is 1 save the file with the
name xgroup1.
 Each group should submit one soft copy (word file) of the assignment answers - showing
the values, formula used and assumption if any in the same folder Please write the
Group No., Names, roll numbers and filename in the word file.

1. A company has nine projects under consideration. The NPV added by each project and
the capital required by each project during the next two years is shown in the following
table. (All numbers are in millions.) For example, project 1 will add $14 million in NPV
and require expenditures of $12 million during year 1 and $3 million during year 2. $50
million is available for projects during year 1, and $20 million is available during year 2.

NPV Year 1 Expenditure Year 2 Expenditure

Project 1 14 12 3
Project 2 17 54 7
Project 3 17 6 6
Project 4 15 6 2
Project 5 40 30 35
Project 6 12 6 6
Project 7 14 48 4
Project 8 10 36 3
Project 9 12 18 3

a) If we can undertake a fraction of a project, how can we maximize NPV?

b) If we can’t undertake a fraction of a project but must undertake all of a project or none
of a project, how can we maximize NPV?
c) Suppose that if project 4 is undertaken, project 5 must be undertaken. How can we
maximize NPV? (15 marks)
2. Refer to the case problem in Text Book “Evaluating Job Applicants for Winston,
Winston & Coombs” given on Page 275 of your Text book. Answer the questions given
at the end of the problem. Data is given in in excel file Assignment (Sheet Hiring).
The marks allocated to various questions are as follows:

2) 3 marks

3) 3 marks

4) 1 mark

5) 3 marks

6) 1 mark

7) 2 marks

8) 1 marks

9) 1 marks

10) 2 marks

11) 1+1+1 marks

3. Roberto's Place is a chain of pizza delivery stores, owned and operated by Roberto
Lunsford. Customers often remark on the quality, variety, and low price of Roberto’s
pizzas. For each store, Roberto has three delivery vehicles. During the past year, Roberto
has noticed an increase in the repair and maintenance costs associated with several of
his delivery vehicles. Under normal circumstances, Roberto will purchase two cars each
year. However, because of the increased repair and maintenance problems, he must
now purchase at least six new vehicles.

After visiting several dealerships, he determines that each vehicle will cost
approximately $20,000. He knows that he can borrow up to $125,000 from a local bank;
the interest rate is about 9 percent; he will need to arrange financing for at least 4
years, and he has $25,000 available for a down payment. Organize this information in a
spreadsheet. What is Roberto’s approximate monthly payment?

If Roberto finances his new pizza delivery vehicles for 5 years instead of 4 years, what is
the new monthly payment? If Roberto wishes to keep his payment below $2000 a
month, should he finance the loan for 5 years instead of 4 years? What is the difference
in monthly payments? Also, what is the difference in total interest between the two
years?
 After speaking with a loan officer at the local bank, Roberto is told that the available
interest rates vary between 8 and 9 percent. Using your spreadsheet product's help
feature, investigate how to build input tables. Next, build a one input table, outlining the
interest rates and associated monthly payments. Your interest rates should increase in
quarter percent increments. What recommendations would you give Roberto? (Marks =
10)

4. A company has warehouses in Los Angeles, St. Louis and Boston. The company has six
retail outlets throughout the United States which place orders, which the company then
ships from one of the warehouses. The company wants to meet the needs of all six retail
outlets from available inventory and keep total shipping charges as minimum as
possible. Per unit shipping cost from each warehouse to each retail outlet is given to you
in table below. For example, the cost to ship a unit from Los Angeles to Denver is $58.
The exact Product needs of each retail store are given. For example, Denver needs 150
units, Houston needs 225, Atlanta 100, Miami 250, Seattle 120 and Detroit needs 150
respectively. The amount of inventory at each of the three warehouses is given to you in
another table. The number of units remaining in each warehouse’s inventory must not
be negative (that is they cannot ship more than what is available). Solve for minimizing
the cost of the all orders, while still supplying each retail outlet with the exactly the
desired number of units. (Marks=10)

  L.A. St. Louis Boston

Denver $58 $47 $108

Houston $87 $46 $100

Atlanta $121 $30 $57

Miami $149 $66 $83

Seattle $62 $115 $164

Detroit $128 $28 $38

L.A. St. Louis Boston

Starting
Inventor
y 400 350 500

5. You have been given the task to plan a direct-mail promotion and asked to determine
the net profit from the activity. The number of promotional mails to be send is 2,75,000
and the expected response rate is 2.5%. The cost to print a single mailer is given and
unit cost varies with the quantity. 0.20 for quantities less than 200,000; 0.15 for
 quantities of 200,001 and 300,000; and 0.10 each for quantities more than 300,000. A
fixed cost of 0.28 is incurred per unit for mailing. The number of responses is calculated
based on the response rate and the number mailed. The company knows that it will
realize an average profit per response of 18.50. Calculate the gross profit, Total costs
including printing and mailing costs and Net Profit.

The manager of the company wants you to summarize the net profit for various
combinations of quantity and response rate. Assume quantity varies from 100,000 to
3,25,000 in multiples of 25,000 and Response rate varies between 1.50% and 3.25% in
multiples of 0.25%. The management has asked you to highlight three scenarios to the
management as shown in table below. Give relevant names to input and output cells.
(Marks=10)

Best Case 325000 3.25%

Worst Case 275000 1.50%

Most Likely 200000 2.50%

6. Maggie Stewart loves deserts, but due to weight and cholesterol concerns, she has
decided that she must plan her desserts carefully. There are two possible deserts she is
considering: snack bars and ice-cream. After reading the nutritional labels on the snack
bar and ice cream packages, she learns that each “serving” of a snack bar weights 37
grams and contains 120 calories and 5 grams of fat. Each serving of ice-cream weighs 65
grams and contains 160 calories and 10 grams of fat. Maggie will allow herself no more
than 450 calorie and 25 grams of fat in her daily deserts, but because she loves deserts
so much, she requires at least 120 grams of deserts per day. Also, she assigns a “taste
index” to each gram of each desert, where 0 is the lowest and 100 is the highest. She
assigns a taste index of 95 to ice-cream and 85 to snack bars (because she prefers ice
cream to snack bars). What should be her daily plan for serving be to stay within her
constraints and maximize the total taste index for her desserts? (10 marks)