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

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.

  1. Formulate an integer linear programming model that will help SUinvestments maximize the total NPV obtained from investments 1–4.
  2. Solve this problem using Excel Solver.
math   Statistics-And-Probability   
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Answer #1

linear programming model of the problem is given as:

Xi(i =1,2.3,4) = 1 (if investment i is made   ; 0 otherwise)

Objective function Z is given as

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

It is Subjected to

5x1 +7x2 +4x3 +3x4≤ 14

Xi=0 or 1 (i=1,2,3,4)

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