Practical Management Science, Loose-leaf Version
5th Edition
ISBN: 9781305631540
Author: WINSTON, Wayne L.; Albright, S. Christian
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 6.3, Problem 10P
Summary Introduction
To determine: The total cash requirement and total NPV without using solver.
Introduction: The variation between the present value of the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Use excel for this problem
A trust officer at the Blacksburg National Bank needs to determine how to invest $150,000 in the following collection of bonds to maximize the annual return.
Bond
Annual Return
Maturity
Risk
Tax
Free
A
9.5%
Long
High
Yes
B
8.0%
Short
Low
Yes
C
9.0%
Long
Low
No
D
9.0%
Long
High
Yes
E
9.0%
Short
High
No
The officer wants to invest at least 40% of the money in short-term issues and no more than 20% in high-risk issues. At least 25% of the funds should go in tax-free investments, and at least 45% of the total annual return should be tax free.
Formulate the LP model for this problem.
Create the spreadsheet model and use Solver to solve the problem.
Your Lego furniture company makes Tables and Chairs. Below, you are given the starting inventory, selling price, and Bill
of Materials (recipe, or construction requirements). You are to determine the number of Tables and Chairs to be built to
maximize revenue.
Your answer will be the number of small wood pieces used by your production plan. (The number of tables and chairs may
not be a whole number, which is acceptable in this problem; the number of pieces of wood should be rounded up the next
highest whole number.)
Use Scenario 5
Large wood per Table
Small wood per Table
Large wood per Chair
Small wood per Chair
Revenue per Table
Revenue per Chair
Large wood inventory
Small wood inventory
Scenario 1
6
3
2
8
$129
$98
285
180
Scenario 2
ԼՐ
5
5
5
8
$209
$160
400
510
Scenario 3
4
3
6
6
$195
$119
900
500
Scenario 4
7
1
6
3
$48
$21
820
700
Scenario 5
8
4
8
8
$155
$189
377
298
Investment Advisors, Inc., is a brokerage firm that manages stock portfolios for a number of clients. A particular portfolio consists of U shares of U.S. Oil and H shares of Huber Steel. The annual
return for U.S. Oil is $3 per share and the annual return for Huber Steel is $5 per share. U.S. Oil sells for $25 per share and Huber Steel sells for $50 per share. The portfolio has $80,000 to be
invested. The portfolio risk index (0.50 per share of U.S. Oil and 0.25 per share for Huber Steel) has a maximum of 700. In addition, the portfolio is limited to a maximum of 1,000 shares of U.S. Oil.
The linear programming formulation that will maximize the total annual return of the portfolio is as follows.
Maximize total annual return
Max 3U + 5H
s.t.
25U + 50H ≤ 80,000
0.50U +0.25H ≤
700
≤ 1,000
1U
U, H ≥ 0
The computer output is shown below.
Optimal Objective Value = 8400.00000
Variable
U
H
Constraint
1
2
3
Variable
U
H
Constraint
1
2
3
Value
800.00000
1200.00000
estimated annual return…
Chapter 6 Solutions
Practical Management Science, Loose-leaf Version
Ch. 6.3 - Prob. 1PCh. 6.3 - Prob. 2PCh. 6.3 - Solve Problem 1 with the extra assumption that the...Ch. 6.3 - Prob. 4PCh. 6.3 - Prob. 5PCh. 6.3 - Prob. 6PCh. 6.3 - Prob. 7PCh. 6.3 - Prob. 8PCh. 6.3 - Prob. 9PCh. 6.3 - Prob. 10P
Ch. 6.4 - Prob. 11PCh. 6.4 - Prob. 12PCh. 6.4 - Prob. 13PCh. 6.4 - Prob. 14PCh. 6.4 - Prob. 15PCh. 6.4 - Prob. 16PCh. 6.4 - Prob. 17PCh. 6.4 - Prob. 18PCh. 6.4 - Prob. 19PCh. 6.4 - Prob. 20PCh. 6.4 - Prob. 21PCh. 6.4 - Prob. 22PCh. 6.4 - Prob. 23PCh. 6.5 - Prob. 24PCh. 6.5 - Prob. 25PCh. 6.5 - Prob. 26PCh. 6.5 - Prob. 28PCh. 6.5 - Prob. 29PCh. 6.5 - Prob. 30PCh. 6.5 - In the optimal solution to the Green Grass...Ch. 6.5 - Prob. 32PCh. 6.5 - Prob. 33PCh. 6.5 - Prob. 34PCh. 6.5 - Prob. 35PCh. 6.6 - Prob. 36PCh. 6.6 - Prob. 37PCh. 6.6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 54PCh. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57PCh. 6 - Prob. 58PCh. 6 - Prob. 59PCh. 6 - Prob. 60PCh. 6 - Prob. 61PCh. 6 - Prob. 62PCh. 6 - Prob. 63PCh. 6 - Prob. 64PCh. 6 - Prob. 65PCh. 6 - Prob. 66PCh. 6 - Prob. 67PCh. 6 - Prob. 68PCh. 6 - Prob. 69PCh. 6 - Prob. 70PCh. 6 - Prob. 71PCh. 6 - Prob. 72PCh. 6 - Prob. 73PCh. 6 - Prob. 74PCh. 6 - Prob. 75PCh. 6 - Prob. 76PCh. 6 - Prob. 77PCh. 6 - Prob. 78PCh. 6 - Prob. 79PCh. 6 - Prob. 80PCh. 6 - Prob. 81PCh. 6 - Prob. 82PCh. 6 - Prob. 83PCh. 6 - Prob. 84PCh. 6 - Prob. 85PCh. 6 - Prob. 86PCh. 6 - Prob. 87PCh. 6 - Prob. 88PCh. 6 - Prob. 89PCh. 6 - Prob. 90PCh. 6 - Prob. 91PCh. 6 - Prob. 92PCh. 6 - This problem is based on Motorolas online method...Ch. 6 - Prob. 94PCh. 6 - Prob. 95PCh. 6 - Prob. 96PCh. 6 - Prob. 97PCh. 6 - Prob. 98PCh. 6 - Prob. 99PCh. 6 - Prob. 100PCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Prob. 3.1CCh. 6 - Prob. 3.2CCh. 6 - Prob. 3.3CCh. 6 - Prob. 3.4CCh. 6 - Prob. 3.5CCh. 6 - Prob. 3.6C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- Suppose you begin year 1 with 5000. At the beginning of each year, you put half of your money under a mattress and invest the other half in Whitewater stock. During each year, there is a 40% chance that the Whitewater stock will double, and there is a 60% chance that you will lose half of your investment. To illustrate, if the stock doubles during the first year, you will have 3750 under the mattress and 3750 invested in Whitewater during year 2. You want to estimate your annual return over a 30-year period. If you end with F dollars, your annual return is (F/5000)1/30 1. For example, if you end with 100,000, your annual return is 201/30 1 = 0.105, or 10.5%. Run 1000 replications of an appropriate simulation. Based on the results, you can be 95% certain that your annual return will be between which two values?arrow_forwardInvestment Advisors, Inc., is a brokerage firm that manages stock portfolios for a number of clients. A particular portfolio consists of U shares of U.S. Oil and H shares of Huber Steel. The annual return for U.S. Oil is $3 per share and the annual return for Huber Steel is $5 per share. U.S. Oil sells for $25 per share and Huber Steel sells for $50 per share. The portfolio has $80,000 to be invested. The portfolio risk index (0.50 per share of U.S. Oil and 0.25 per share for Huber Steel) has a maximum of 700. In addition, the portfolio is limited to a maximum of 1000 shares of U.S. Oil. The linear programming formulation that will maximize the total annual return of the portfolio is as follows: Max 3U + 5H Maximize total annual return s.t. 25U + 50H <= 80,000 Funds available 0.5U + 0.25H <= 700 Risk maximum 1U <= 1000 U.S. oil Maximum U, H >= 0 The computer solution is shown in…arrow_forwardStock in Company A sells for $89 a share and has a 3-year average annual return of $24 a share. The beta value is 1.26. Stock in Company B sells for $83 a share and has a 3-year average annual return of $18 a share. The beta value is 1.13. Derek wants to spend no more than $19,000 investing in these two stocks, but he wants to earn at least $2100 in annual revenue. Derek also wants to minimize the risk. Determine the number of shares of each stock that Derek should buy. Set up the linear programming problem. Let a represent the number of shares of stock in Company A, b represent the number of shares of stock in Company B, and z represent the total beta value. Minimize z3 1.26а + 1.13b subject to 89а + 83b s 19000 24a + 18b > 2100 a 2 0, b20. (Use integers or decimals for any numbers in the expressions. Do not include the $ symbol in your answers.) Derek should buy 88 share(s) of stock in Company A and 0 share(s) of stock in Company B. (Round to the nearest integer as needed.)arrow_forward
- Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client's needs. For a new client, Innis has been authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10%; each unit of the money market fund costs $100 and provides an annual rate of return of 4%. The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis' risk measurement system, each unit invested in the stock fund has a risk index of 8, and each unit invested in the money market fund has a risk index of 3. The higher risk index associated with the stock fund simply indicates that it is the riskier investment. Innis's client also specified that at least $300,000 be invested in the money market fund. Refer to the computer solution shown below. Optimal…arrow_forwardIn a capital budgeting problem, a decision maker having a limited amount of budget is considering to give financial support to research project A, B, C, D and E. Suppose is a binary variable, which equals 1 if project is chosen and 0 otherwise. Which of the following logical constraints correctly models the requirement that “If Project C is not chosen, Then Projects A and B must be chosen”? A. Xa +Xb <= Xc B. 1- Xc <= Xa +Xb C. 1- Xc <= Xa , 1- Xc <= Xb D. Xa +Xb <= 1 + Xcarrow_forwardThe Schoch Museum (see Problem 30 in Chapter 11) is embarking on a five-year fundraising campaign. As a nonprofit institution, the museum finds it challenging to acquire new donors, as many donors do not contribute every year. Suppose that the museum has identified a pool of 8,000 potential donors. The actual number of donors in the first year of the campaign is estimated to be somewhere between 60% and 75% of this pool. For each subsequent year, the museum expects that a certain percentage of current donors will discontinue their contributions. This is expected to be between 10% and 60%, with a most likely value of 35%. In addition, the museum expects to attract some percentage of new donors. This is assumed to be between 5% and 40% of the current year’s donors, with a most likely value of 10%. The average contribution in the first year is assumed to be $50 and will increase at a rate between 0% and 8% each subsequent year, with the most likely increase of 2.5%. Develop and analyze a…arrow_forward
- During the first year software will be purchased from a reputable vendor for $3,000,000. An internal team aided by a hired consulting is also used. The payroll for the internal team is $500,000 for the first year and increases by $500,000 in years two and three. Also, $500,000 will be spent on consulting during the first year and $1,000,000 during each of years two and three. $2,000,000 will need to be invested in hardware during the second year and an additional $500,000 investment in hardware will be needed for year three. $200,000 in training will be needed the first year, $500,000 the second year, and $2,000,000 the third year. Management considers the expenditures for the first three years as investment in the system. Management estimates the operating cost of the system to be $2,500,000 (for personnel and other costs) in year 4 and to grow by 6% per year for years 5 through 10. The benefits are estimated to be $4,000,000 for year 4 and to grow by 30% per year for years 5…arrow_forwardIn the problem on excel : 1.What are the decision variables 2.What is the objective functions 3. What are the 12 constraints and explain You won $750,000 from a lottery and, you have decided to come up with a list of possible investments that you will invest, all of the $750,000 that you have won. The expected return of each of the 6 possible investments that you are considering investing in,and their Expected Rate of Return over the next year are in the table below. Investment Expected Rate of return Amazon Inc (USA Shares) 13.5% Royal Bank of Canada (Canadian Shares) 7.4% Nike Inc (USA Shares) 10.0% Telus Corporation (Canadian Shares) 6.1% Snap Inc (USA Shares) 3.0% Nestle SA (Switzerland Shares) 4.8% it is important to have a diversified portfolio, and therefore have come up with the following guidelines on how to invest your money: 1.The total invested in USA Shares should be at least 10% but no more then 45% of the total…arrow_forwardwith the information given draw a graph, On the x-axis, you would have the number of units sold (from 0 to 800,000 in increments of 100, 000) and on the y-axis, you would have the dollar amount (from 0 to $3,200,000 in increments of $ 400,000). Draw a line from the origin with a slope equal to the variable cost per unit ($2.5) to represent total variable costs. Draw a horizontal line at $600,000 to represent total fixed costs. The sum of these two lines gives the total cost line. Draw another line from the origin with a slope equal to the selling price per unit ($4) to represent total sales. The point where the total sales line intersects the total cost linearrow_forward
- For the products A, B, C, and D, which of the following could be a linear programming objective function? Select one: a. Z = 1A + 2BC + 3D b. Z = 1A + 2AB + 3ABC + 4ABCD c. Z = 1A + 2B + 3C + 4D d. Z = 1A + 2B/C + 3Darrow_forwardJJ is the financial manager in charge of the company pension fund at Arm Inc. JJ knows that the fund must be sufficient to make the payments listed in Table. Each payment must be made on the first day of each year. JJ is going to finance these payments by purchasing bonds. It is currently January 1 of year 1, and three bonds are available for immediate purchase. The prices and coupons for the bonds are as follows. (We assume that all coupon payments are received on January 1 and arrive in time to meet cash demands for the year on which they arrive.) ■ Bond 1 costs $980 and yields a $60 coupon in the years 2 through 5 and a $1060 payment on maturity in the year 6.■ Bond 2 costs $970 and yields a $65 coupon in the years 2 through 11 and a $1065 payment on maturity in the year 12.■ Bond 3 costs $1050 and yields a $75 coupon in the years 2 through 14 and a $1075payment on maturity in the year 15.JJ must decide how much cash to allocate (from company coffers) to meet the initial $11,000…arrow_forwardJJ owns a company that makes candles. The three most popular candles are created using a combination of the same three base scents: citrus, lavender, and vanilla. The makeup of these candles is given below: Citrus Scent Lavender Scent vanilla Scent Profit per Candle Candle Citrus Burst 80% 20% 0% $5.50 Lemon Cookie 15% 0% 85% $5.25 Floral Breeze 20% 70% 20% $5.75 Formulate the linear program for the above problem to maximize profit. Do not solve. All constraints must be in proper linear programming format to receive credit. Decision Variable descriptions: X1: Number of Citrus Burst candles X2: Number of Lemon Cookie candles X3: Number of Floral Breeze candles A.) Which of these is the objective function? [ Select ] B.) How would you write a constraint specifying that lavender scent makes up at least 20% of the total components? [Select] C.) JJ's marketing department has estimated that it will need at least 60 candles to meet the expected demand. How would you write a constraint to…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,