Question
A global investment company would like to make an investment on several Oil and Gas Companies in the United States. Total annual expected return (in
A global investment company would like to make an investment on several Oil and Gas Companies in the United States. Total annual expected return (in thousands) and cost for block of shares (investment costs in thousands) are given in Table 1.
Table 1. Company name, expected annual return and cost for block of shares
Constraints:
Total maximum investment is limited to 3,000$
The investor should invest in at least two Texas companies (Trans-Texas, Houston Drilling and Lone Star Petro)
The investor should invest in only one California company (San Diego Oil and California Petro)
The investor should invest in maximum one foreign companies (British Petro and Dutch Shell)
The binary investment value of British Petro should be less than the binary investment value of Trans Texas
Considering the above table and the investment constraints,
After solving LP model in the Excel Solver for each binary decision variable, please find the total expected annual return; list the oil companies that have an investment value of 1, and point out binding and nonbinding constraints and show slack values (20 points).
EXPECTED COST FOR COMPANY NAME ANNUAL RETURN BLOCK OF SHARES (LOCATION) Trans-Texas Oil (Texas) British Petro (Foreign) Dutch Shell (Foreign) Houston Drilling (Texas) Lone Star Petro (Texas) (IN THOUSANDS) $ 50 $ 80 $ 90 (IN THOUSANDS) $ 480 $ 540 $ 680 $1,000 $ 700 $ 510 $ 900 $120 $110 San Dieago Oil (California) California Petro (California) $ 40 $ 75
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