Formulate a linear programming model that can be used to determine the number of shares of East End Cable and the number of shares of CampSwitch that will meet the investment constraints and maximize the total returns for the investment. Graph the feasible region.
Mr. Albert Richardson, a financial advisor at NNW Investments identified two companies that are likely candidates for a takeover in the near future. East End Cable is a leading manufacturer of flexible cable systems used in the construction industry, and CampSwitch is a new firm specializing in digital switching systems. East End Cable is currently trading at $40 per share, and CampSwitch is currently trading at $25 per share. If the takeovers occur, Mr. Richardson estimates that the price of East End Cable will go to $55 per share and CampSwitch will go to $43 per share. At this point in time, Mr. Richardson has identified CampSwitch as the higher-risk alternative.
Assume that a client has indicated a willingness to invest a maximum of $50,000.00 in the two companies. The client wants to invest at least $15,000.00 in East End Cable and at least 10,000.00 in CampSwitch. Because of the high risk associated with CampSwitch, Mr. Richardson has recommended that at most $25,000.00 should be invested in CampSwitch.
- Formulate a linear programming model that can be used to determine the number of shares of East End Cable and the number of shares of CampSwitch that will meet the investment constraints and maximize the total returns for the investment.
- Graph the feasible region.
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