Spencer Enterprises is attempting to choose among a series of new Investment alternatives. The potential Investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows. Capital Requirements ($) Alternative Number 1 2 3 4 5 6 Capital funds available. Alternative Limited warehouse expansion Extensive warehouse expansion Test market new product Advertising campaign Basic research Purchase new equipment Net Present Value ($) 3,500 5,500 10,000 4,500 7,500 2,500 Year 1 2,000 5,000 3,000 2,500 3,500 4,000 6,000 1,000 10,500 Year 2 1,000 An Integer programming model for maximizing the net present value (in $) is developed. Letting x, = 1,500 1,000 500 Year 3 7,000 4,000 3,500 5,000 1,800 4,000 900 8,750 if investment alternative / Is selected for = 1, 2, 3, 4, 5, 6. 1, 2, 3, 4, 5, 6.) 0 otherwise (a) Assume that only one of the warehouse expansion projects can be implemented. What additional constraint should be added to the integer programming model? (b) If new equipment is purchased, one of the warehouse expansion projects must be implemented. What additional constraint should be added to the Integer programming model?
Spencer Enterprises is attempting to choose among a series of new Investment alternatives. The potential Investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows. Capital Requirements ($) Alternative Number 1 2 3 4 5 6 Capital funds available. Alternative Limited warehouse expansion Extensive warehouse expansion Test market new product Advertising campaign Basic research Purchase new equipment Net Present Value ($) 3,500 5,500 10,000 4,500 7,500 2,500 Year 1 2,000 5,000 3,000 2,500 3,500 4,000 6,000 1,000 10,500 Year 2 1,000 An Integer programming model for maximizing the net present value (in $) is developed. Letting x, = 1,500 1,000 500 Year 3 7,000 4,000 3,500 5,000 1,800 4,000 900 8,750 if investment alternative / Is selected for = 1, 2, 3, 4, 5, 6. 1, 2, 3, 4, 5, 6.) 0 otherwise (a) Assume that only one of the warehouse expansion projects can be implemented. What additional constraint should be added to the integer programming model? (b) If new equipment is purchased, one of the warehouse expansion projects must be implemented. What additional constraint should be added to the Integer programming model?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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Transcribed Image Text:Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential Investment alternatives, the net present value of the future stream of returns, the capital
requirements, and the available capital funds over the next three years are summarized as follows.
Alternative
Number
1
2
3
4
5
6
Capital funds available
Alternative
Limited warehouse expansion
Extensive warehouse expansion
Test market new product
Advertising campaign.
Basic research
Purchase new equipment
Net Present
Value ($)
3,500
5,500
10,000
4,500
7,500
2,500
Capital Requirements ($)
Year 1
3,000
2,500
6,000
2,000
5,000
1,000
10,500
Year 2
1,000
3,500
4,000
1,500
1,000
500
7,000
Year 3
4,000
3,500
5,000
1,800
4,000
900
8,750
1 if investment alternative / Is selected for i=1, 2, 3, 4, 5, 6.
0 otherwise
An Integer programming model for maximizing the net present value (in $) is developed. Letting x, =
(a) Assume that only one of the warehouse expansion projects can be implemented. What additional constraint should be added to the integer programming model?
(b) If new equipment is purchased, one of the warehouse expansion projects must be implemented. What additional constraint should be added to the integer programming model?
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