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As you have learned in the assigned course readings, there are many ways to define decision variables in a mathematical model. For a model formulated
As you have learned in the assigned course readings, there are many ways to define decision variables in a mathematical model. For a model formulated with one set of decision variables to be equivalent to another model of the same problem formulated using a different set of decision variables, some or all of the coefficients of the model will have to be different. Consider the investment problem faced by Shari Winslow, a recent BBA graduate of Algoma University in 2018. Shari has $4000 which she wants to put into a tax-free saving account before April 15. Doing so will save Shari over $1600 in Canada and Ontario income taxes. Although Shari had passed the two required courses in statistics and in corporate finance during her recent BBA degree, she is not an experienced investor. She knows that she wants to invest in stocks rather than bonds or mutual funds. Shari has heard that Sincad O'Jaynes, a financial expert in Brampton, has predicted large increases in the following stocks during the coming year: Shares of X-Topeka Electronics should rise to $50. Strong Crosswind should experience a 20% rise in the value of its stock. Gen'Techserve should match the peak price of $75 it achieved during the past year. The current share prices for X-Topeka Electronics, Strong Crosswind, and Gen Techserve are $42, 530, and $64, respectively, Shari has decided to invest in one or more of these companies for a year and then reevaluate her future investments. While her goal is to maximize the projected retum over the coming year, she has decided to be somewhat conservative and to invest at least $800 in Strong Crosswind and at least S1000 in a one-year Ontario Government Savings Certificate of Deposit paying 3%. She wants to invest no more than $2000 in either X- Topeka Electronics or Gen Techserve Required: a Formulate this problem as an algebraic model using decision variables X1, X2, and X3 to represent the dollar investment in Topeka Electronics, Crosswind, and Genserve, respectively, and X4 represents the amount invested in the Ontario Savings Certificate, b. Formulate this problem as an algebraic model using decision variables Y. Y2 and Y3. representing the number of shares of stock purchased in Topeka Electronics, Crosswind, and Genserve, respectively, with X4 still representing the amount invested in the Ontario Government Savings Certificate. c. If both the LP models in (a) and (b) were solved. How should the results of both models compare?
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