Federated Oil has refineries in Los Angeles and Chicago. The Los Angeles refinery can refine up to two million barrels of oil per year, and the Chicago refinery up to three million. After the oil is refined, it is shipped to two distribution points, Houston and New York City. Federated Oil estimates that each distribution point can sell up to five million barrels per year. Because of differences in shipping and refining costs, the profit earned (in dollars) per million barrels of oil shipped depends on where the oil was refined and on the point of distribution. This information is listed in the file P04_69.xlsx. The company is considering expanding the capacity of each refinery. Each million barrels of annual refining capacity that is added will cost $120,000 for the Los Angeles refinery and $150,000 for the Chicago refinery. Determine how Federated Oil can maximize its profit (including expansion costs) over a 10-year period.
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