I need help developing a linear programming model to minimize the total dollars needed to be invested now to meet the expansion cash needs in the next 8 years. Your corporation has just approved an 8-year expansion plan to grow its market share. The plan requires an influx of cash in each of the 8 years. Management wants to develop a financial plan to ensure the cash needed for the expansion will be available at the beginning of each of the 8 years. The corporation has the following investment options: Security Price per unit Return Rate (%) Years to Maturity 1 $1,200 10.255 5 2 $1,000 6.7550 6 3 $1,175 12.110 7 Savings Account 5.500 Each unit of security 1, 2, and 3 guarantees to pay $1,000 at maturity. Investments in these securities must take place only at the beginning of year 1 and will be held until maturity. Any funds not invested in securities will be invested in a savings account that pays the annual interest rates noted above. The following table summarizes the cash needs for the expansion plan for each of the 8 years: Year 1 = $250,000 Year 5 = $295,000 Year 2 = $300,000 Year 6 = $310,000 Year 3 = $225,000 Year 7 = $280,000 Year 4 = $235,000 Year 8 = $305,000
I need help developing a linear programming model to minimize the total dollars needed to be invested now to meet the expansion cash needs in the next 8 years.
Your corporation has just approved an 8-year expansion plan to grow its market share. The plan requires an influx of cash in each of the 8 years. Management wants to develop a financial plan to ensure the cash needed for the expansion will be available at the beginning of each of the 8 years.
The corporation has the following investment options:
|
Security |
Price per unit |
Return Rate (%) |
Years to Maturity |
|
1 |
$1,200 |
10.255 |
5 |
|
2 |
$1,000 |
6.7550 |
6 |
|
3 |
$1,175 |
12.110 |
7 |
|
Savings Account |
|
5.500 |
|
Each unit of security 1, 2, and 3 guarantees to pay $1,000 at maturity. Investments in these securities must take place only at the beginning of year 1 and will be held until maturity. Any funds not invested in securities will be invested in a savings account that pays the annual interest rates noted above.
The following table summarizes the cash needs for the expansion plan for each of the 8 years:
|
Year 1 = $250,000 |
Year 5 = $295,000 |
|
Year 2 = $300,000 |
Year 6 = $310,000 |
|
Year 3 = $225,000 |
Year 7 = $280,000 |
|
Year 4 = $235,000 |
Year 8 = $305,000 |
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
