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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 ($) Net Present Value ($) Year 1 Year 2 Year 3 Alternative Number Alternative 3,500 3,000 1,000 4,000 Limited warehouse expansion Extensive warehouse expansion 5,500 2,500 3,500 3,500 2 11,000 6,000 4,000 5,000 3 Test market new product Advertising campaign 4,500 2,000 1,500 1,800 4 Basic research 8,500 5,000 1,000 4,000 6. Purchase new equipment 3,500 1,000 500 900 10,500 7,000 8,750 Capital funds available An integer programming model for maximizing the net present value (in $) is developed. Letting x,o otherwise Si if investment alternative / is selected for i- 1, 2, 3, 4, 5, 6.) (a) Assume that Test market new product will only be funded if the Basic research is also funded. What additional constraint should be added to the integer programming model? (b) Assume 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 ($) Net Present Value ($) Year 1 Year 2 Year 3 Alternative Number Alternative 3,500 3,000 1,000 4,000 Limited warehouse expansion Extensive warehouse expansion 5,500 2,500 3,500 3,500 2 11,000 6,000 4,000 5,000 3 Test market new product Advertising campaign 4,500 2,000 1,500 1,800 4 Basic research 8,500 5,000 1,000 4,000 6. Purchase new equipment 3,500 1,000 500 900 10,500 7,000 8,750 Capital funds available An integer programming model for maximizing the net present value (in $) is developed. Letting x,o otherwise Si if investment alternative / is selected for i- 1, 2, 3, 4, 5, 6.) (a) Assume that Test market new product will only be funded if the Basic research is also funded. What additional constraint should be added to the integer programming model? (b) Assume 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
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter11: Simulation Models
Section11.4: Marketing Models
Problem 30P: Seas Beginning sells clothing by mail order. An important question is when to strike a customer from...
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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 ($) Net Present Value ($) Year 2 Year 3 Alternative Number Year 1 Alternative 3,500 3,000 1,000 4,000 1 Limited warehouse expansion 5,500 2,500 3,500 3,500 Extensive warehouse expansion Test market new product 11,000 6,000 4,000 5,000 3 Advertising campaign 4,500 2,000 1,500 1,800 8,500 5,000 1,000 4,000 Basic research Purchase new equipment 3,500 1,000 500 900 6. Capital funds available 10,500 7,000 8,750 An integer programming model for maximizing the net present value (in $) is developed. S1 if investment alternative / is selected for i= 1, 2, 3, 4, 5, 6. (o otherwise Letting x %3D (a) Assume that Test market new product will only be funded if the Basic research is also funded. What additional constraint should be added to the integer programming model? (b) Assume if new equipment is purchased, one of the warehouse expansion projects must be implemented. What additional constraint should be added to the integer programming model?
Transcribed Image Text:Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows. Capital Requirements ($) Net Present Value ($) Year 2 Year 3 Alternative Number Year 1 Alternative 3,500 3,000 1,000 4,000 1 Limited warehouse expansion 5,500 2,500 3,500 3,500 Extensive warehouse expansion Test market new product 11,000 6,000 4,000 5,000 3 Advertising campaign 4,500 2,000 1,500 1,800 8,500 5,000 1,000 4,000 Basic research Purchase new equipment 3,500 1,000 500 900 6. Capital funds available 10,500 7,000 8,750 An integer programming model for maximizing the net present value (in $) is developed. S1 if investment alternative / is selected for i= 1, 2, 3, 4, 5, 6. (o otherwise Letting x %3D (a) Assume that Test market new product will only be funded if the Basic research is also funded. What additional constraint should be added to the integer programming model? (b) Assume 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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