UBEQ 1013/ UKEQ 1013 QUANTITATIVE TECHNIQUES I ASSIGNMENT

Instruction:
1) Use Microsoft Excel ONLY to solve the following problems.
2) Answers must be type-written nicely. ALL input and output printouts shall be submitted
together with the answers.
3) Please provide cover page which includes ALL NAMES and ID of the group members.
One group consists of maximum 6 or 7members only.
4) The submission date is on WEEK 8 (11/03/2016)before 5pm. Late submission 10 marks
will be deducted.
4) You must submit at respective tutors room.
Problem 1 : API Capital Investment Valuation
API Capital Sdn Bhd is evaluating three mutually exclusive business projects in which it intends
to invest in Cambodia. The initial investment capital and after-tax cash flows associated with
these projects are shown in the following table.

Cash Flow
Year 0 (Initial investment)
Year 1
Year 2
Year 3
Year 4
Year 5

Project 1 :
Cocoa Plantation
(RM60,000)
20,000
20,000
20,000
20,000
20,000

Project 2 :
Bird Nest
(RM100,000)
31,500
31,500
31,500
31,500
31,500

(i) Determine the payback period for each project.

(ii)

Project 3 :
Aquaculture
(RM110,000)
32,500
32,500
32,500
32,500
32,500
(3 marks)

Determine the net present value (NPV) for the three projects. Assuming that APIs cost of
capital equal to 13%.
(6 marks)

(iii) Determine the internal rate of return (IRR) for each project.

(6 marks)

(iv) Which project should be adopted?

(2 marks)

(v)

Critically evaluate the IRR and NPV approaches in investment/project valuation and
explain the reasons why NPV generally outperformed the IRR approach.
(8 marks)
1

UBEQ 1013/ UKEQ 1013 QUANTITATIVE TECHNIQUES I ASSIGNMENT

[Total 25 Marks]
Problem 2 : ART Furniture Production Mix
ART Furniture Sdn Bhd produces six products from six inputs. Each product requires different
combinations and amounts of inputs. The following table shows the profit and raw materials
requirements for each product. The last column shows the total amounts of raw materials
available.
Products

Profits

60

70

48

5
2

48

60

400

2.
5
1.
5
-

1.
5
4

580

890

0.
5
1.
5
0.
5

0.
5
0.
5
0.
5
1

2.5

525

650

1.
5

620

Inputs required:
Aluminum
0.
5
Steel
2
Plastic

Rubber

1.
5
1.
5
0.
5

Glass
Chrome

2
2

1
2

Total
Amounts
of inputs

(a)

Formulate the appropriate linear programming model.

(5 marks)

(b)

Find the companys most profitable production plan using a Linear

Programming, computer programme and determine the profit maximization
value.
(5 marks)
[Total 10 Marks]

UBEQ 1013/ UKEQ 1013 QUANTITATIVE TECHNIQUES I ASSIGNMENT

Problem 3: Project Optimization of SabakPerdanaHousing Development
Sabak Perdana Development Sdn Bhd acquired a piece of 35 acres land in Sabak Bernam in
2015. The company is planning to use the land for new housing development. The initial plan of
the project was proposed by the architect of the company which consists of 3 types of houses,
namely double story terrace houses (24x80), semi-detached houses (40x80) and bungalows
(80x120). The 3 types of houses to be built are based on a demand response survey done by a
market survey consultant engaged by the company.
After setting aside the land requirements for infrastructure and recreation parks, the total buildable
area is reduced to 30 acres only. To construct a terrace house, it is estimated that a total of 30,300
labour hours are required and, similarly, 37,800 and 50,400 labour hours are needed to build one
unit of semi-d and bungalow, respectively. Meanwhile, the building and financing costs for each
unit of terrace house, semi-d and bungalow is estimated at RM170,000, RM215,000 and
RM320,000. In addition, it is estimated that a unit of terrace house, semi-d and bungalow will
utilise 0.05, 0.08 and 0.22 acre of the buildable lands respectively. Besides, the company has
allocated a total of RM100,000,000 working capital for this project and it is estimated the
construction of all houses has to be completed in 15 months, thus, the total labour hours available
is calculated at 15,120,000 hours.
The selling price of one unit of terrace house is set at RM245,000 while semi-d and bungalow is
selling at RM308,000 and RM438,000 each. At these selling prices, Sabak Perdana is projecting
to make a net profit of RM52,000, RM68,000 and RM92,000 for the 3 types of houses.
During the planning stage, the management already received a total of 15 pre-launch bookings of
its bungalow units which some came from the directors and top management of the company.
You are required to set up the linear programming model in line with the profit maximization
objective of Sabak Perdana and solve the following problems.
Note:
X = Link Houses, Y = Semi-D and Z = Bungalow. You will be required to model this problem
approximately using continuous variables and round off the answer to the nearest discrete value
after solution.

UBEQ 1013/ UKEQ 1013 QUANTITATIVE TECHNIQUES I ASSIGNMENT

(i)

Build the Liner Programming model for Sabak Perdana. How many of each house type
should be built in order to achieve a maximum profit for the company?
(8 marks)

(ii)

What is the estimated profit shall Sabak Perdana adopted the optimal solution generated
by the LP Model?
(3 marks)

(iii)

Are there any resources left over when the maximum profit is achieved? If so, list all
resources left over and the quantities of each. What should you proposed for to manage
the left over resources?
(4 marks)

(iv)

Use the sensitivity report to figure out the maximum increase that is allowable of the
profits of terrace houses and Semi-D houses that will not change the optimum solution.
(2 marks)

(v)

If the number of labor hours increased by 60,000, predict the maximum profit by using
shadow variables. (Show how you calculate this answer).
(3marks)

(vi)

What is the shadow price for the bungalows constraint? How do you interpret it?
(2 marks)

(vii)

If the selling price and costs of building bungalows remained the same, determine
whether should Sabak Perdana build more of bungalows for the project? If Sabak
Perdana would to build 16 units of bungalows, what is the implication to the profits of
the company? Explain your answers.
(3 marks)

[Total 25 Marks]

UBEQ 1013/ UKEQ 1013 QUANTITATIVE TECHNIQUES I ASSIGNMENT