Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A financial advisor at Diehl Investments identified two companies that are likely candidates for a takeover in the near future. Eastern Cable is a leading

A financial advisor at Diehl Investments identified two companies that are likely candidates for a takeover in the near future. Eastern Cable is a leading manufacturer of flexible cable systems used in the construction industry, and ComSwitch is a new firm specializing in digital switching systems. Eastern Cable is currently trading at $40 per share, and ComSwitch is currently trading for $25 per share. If the takeovers occur, the financial advisor estimates that the price of Eastern Cable will go to $55 per share and ComSwitch will go to $43 per share. At this point in time, the financial advisor has identified ComSwitch as the higher risk alternative. Assume that a client indicated a willingness to invest a maximum of $50,000 in the two companies. The client wants to invest at least $15,000 in Eastern Cable and at least $10,000 in ComSwitch. Because of the higher risk associated with ComSwitch, the financial advisor has recommended that at most $25,000 should be invested in ComSwitch.

a. Formulate a linear programming model that can be used to determine the number of shares of Eastern Cable and the number of shares of ComSwitch that will meet the investment constraints and maximize the total return for investment

b. Graph the feasible region.

c. Determine the coordinates of each extreme point.

d. Find the optimal solution.

**Show calculations and explainations for answers!!

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Security Global Vulnerabilities Threats And Responses

Authors: Martin S. Navias

1st Edition

1787381366, 978-1787381360

More Books

Students also viewed these Finance questions

Question

=+B. What happens to inflation and unemployment in the short run?

Answered: 1 week ago

Question

Example. Evaluate 5n+7 lim 7-00 3n-5

Answered: 1 week ago