Optimizing Investments for Lauren Muffet's Firm
How can Lauren Muffet maximize the total ending cash value of her $500,000 investment in her firm?
What are the three areas for investment identified by Lauren Muffet? How much should be invested in each area to maximize returns?
Optimizing Investments for Maximum Returns
Lauren Muffet has identified three areas for investment in her firm:
1. Product research and development
2. Manufacturing operations improvements
3. Advertising and sales promotion
To maximize the total ending cash value of her $500,000 investment, Lauren should follow these investment strategies:
Investment Strategies for Maximum Returns
1. Product Research and Development: Lauren should invest $50,000 initially and continue with this investment for a 3-year period, expecting a return of the investment plus 50% at the end of the 3-year period.
2. Manufacturing Operations Improvements: Lauren should invest $40,000 initially and reinvest in this area every 2 years, expecting a return of the investment plus 30% at the end of each 2-year period.
3. Advertising and Sales Promotion: Lauren must invest a minimum of $30,000 in this area every year to maximize returns. Each dollar invested is expected to yield a return of the amount invested plus 20% yearly.
To determine the optimal investment amounts for each year and option, Lauren should use Excel to calculate the investment decisions based on the constraints and expected returns from each area.
Using Excel for Optimal Investments
By setting up a spreadsheet with the annual investment amounts, Lauren can determine the optimal allocation of funds to maximize the total ending cash value of her initial $500,000 investment.
Follow the step-by-step approach outlined in the solution to calculate the investment amounts for each year and option. Remember to set up constraints and use Excel's Solver add-in to find the optimal solution.
With careful planning and strategic investment decisions, Lauren Muffet can enhance the growth and profitability of her firm by maximizing the returns on her initial $500,000 investment.