1 answer

SUinvestments is considering four investments. Investment 1 will yield a net present value (NPV) of $16,000;...

Question:

SUinvestments is considering four investments. Investment 1 will yield a net present value (NPV) of $16,000; investment 2, an NPV of $22,000; investment 3, an NPV of $12,000; and investment 4, an NPV of $8,000. Each investment requires a certain cash outflow at the present time: investment 1, $5,000; investment 2, $7,000; investment 3, $4,000; and investment 4, $3,000. Note that no partial investments are allowed. Currently, $14,000 is available for investment. Formulate an integer linear programming model that will help SUinvestments maximize the total NPV obtained from investments 1–4. Solve this problem using Excel Solver. **I understand the constraints and objective function, but how would you formulate it excel?


Answers

Answer:

Formulation of the problem:-

Xj(j =1,2.3,4) = 1 (if investment j is made   ; 0 otherwise)

Objective function:-

Z= 16x1 +22x2 +12x3 +8x4

Subject to:-

5x1 +7x2 +4x3 +3x4≤ 14

Xj=0 or 1 (j=1,2,3,4)

.

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