Answer:
Project A = $240,000
Project B = $360,000
Explanation:
Planned Investment amount = $600,000
Project A = x dollars, with 9% return
Project B = Y dollars, with 16% return
Project B should not exceed 40% of total investment amount
Therefore, if y dollars is spent on project B,
(600,000 - y) is spent on project A
Return on project A :
0.09(600,000 - y) = 54,000 - 0.09y
Return on project B :
0.16y
Total return = return on A + return on B
54,000 - 0.09y + 0.16y
Total return = 54,000 + 0.07y
Note: Project B should not exceed 40% of investment, Therefore,
y <= 0.4(600,000)
y <= 240,000
slope of the function is positive '54,000 + 0.07y', total return increases when y increases.
Therefore return on investment will be maximized when y = 240,000, as it should not exceed 40% for project B and the rest 360,000 can be invested in project A.
