Cash now 250 Ch 6001 SO) Background The AnXin Golden Limited operates upscale retirement communities in metropolitan of mainland china. The past few years have been difficult ones for AnXin. The demand for retirement community housing has been light and AnXin has been unable to maintain full occupancy. llowever, this market's future is looking brighter, which is reflected in the company's imminent cash flow problem as shown in Table 2.1. Currently, with only $200 million in cash reserves, it appears that AnXin will need to take out some loans to provide with all the construction costs, Construction Cost Year! 1000 Year 2 -200 200 Year 3 -200 Year 4 400 130 Year 5 Year 6 300 50 Year 7 500 500 Year 8 700 500 Year 9 1000) 1500 Year 10 NDO Table 2.1. Cash flow and Construction Cost (all cash figures in Millions) Bank has offered two types of loans to AnXin. (1) The first is to borrow a nine-year loan, whose annual interest rate is 7 percent. The company decides to borrow this long-term loan at the beginning of year 1. The interest will be made annually from year 2 to year 10 and then the entire principal repaid in a single balloon payment at year 10 (2) The second option is to borrow a series of one-year loans, whose annual interest rate is 10 percent. These loans can be taken out cach year as needed, but each must be repaid (with interest) the following year. The company decides to borrow the loan at the beginning of year 1. year 2. year 3. year 4, and year 5 only. Aside from loans, the corporate treasurer also decides to set aside certain amount when cash llow getting better, and invest into goverment bonds limited to three choices shown in Table 2.2. For example, considering it takes three years for ibond to mature, AnXin will buy nt the beginning of year 6 only. Acting as the consultant of AnXin Limited, your team is going to define the constraints in the business scenario by formulating a LP problem and develop a decision support system (DSS) to help decision making of choices of loans / investments while maximizing the ending balance in year 10. Bonds Rate(%) Years to Maturity Buy ibond 3.00 Beginning of Year 6 sh | SOCI s Bepinning of Years EBood 7.00 5 Beginning of Year 4 Table 2.2. Bond Choices Deliverables: (DSS) As the consultant, your team needs to deliver a decision support system which can support the following functions. . Allow AnXin's manager to input in the interface of DSS system both the cash flow and construction cost (Table 2.1), as well as the investment choices (Table 2.2) to facilitate the management work; Allow manager to change in the interface of DSS system the cash flow or construction cost (Table 2.1), and solve the LP problem with the new cost in the real-world business scenario. Your DSS system will show the optimal solution and objective to facilitate the mannger's decision making. Allow manager to change the choices of investments (Table 2.2), e.g. rate of xbond changes, and the solve the LP problem with the new business scenario, Your DSS system will show the optimal solution and objective to facilitate the manager's decision making. Discuss: given the specific abstraction / assumption you assumed in the project and the DSS implementation, what are the limitations of your LP problem formulate? What are the limitations of your DSS implementation? Cash now 250 Ch 6001 SO) Background The AnXin Golden Limited operates upscale retirement communities in metropolitan of mainland china. The past few years have been difficult ones for AnXin. The demand for retirement community housing has been light and AnXin has been unable to maintain full occupancy. llowever, this market's future is looking brighter, which is reflected in the company's imminent cash flow problem as shown in Table 2.1. Currently, with only $200 million in cash reserves, it appears that AnXin will need to take out some loans to provide with all the construction costs, Construction Cost Year! 1000 Year 2 -200 200 Year 3 -200 Year 4 400 130 Year 5 Year 6 300 50 Year 7 500 500 Year 8 700 500 Year 9 1000) 1500 Year 10 NDO Table 2.1. Cash flow and Construction Cost (all cash figures in Millions) Bank has offered two types of loans to AnXin. (1) The first is to borrow a nine-year loan, whose annual interest rate is 7 percent. The company decides to borrow this long-term loan at the beginning of year 1. The interest will be made annually from year 2 to year 10 and then the entire principal repaid in a single balloon payment at year 10 (2) The second option is to borrow a series of one-year loans, whose annual interest rate is 10 percent. These loans can be taken out cach year as needed, but each must be repaid (with interest) the following year. The company decides to borrow the loan at the beginning of year 1. year 2. year 3. year 4, and year 5 only. Aside from loans, the corporate treasurer also decides to set aside certain amount when cash llow getting better, and invest into goverment bonds limited to three choices shown in Table 2.2. For example, considering it takes three years for ibond to mature, AnXin will buy nt the beginning of year 6 only. Acting as the consultant of AnXin Limited, your team is going to define the constraints in the business scenario by formulating a LP problem and develop a decision support system (DSS) to help decision making of choices of loans / investments while maximizing the ending balance in year 10. Bonds Rate(%) Years to Maturity Buy ibond 3.00 Beginning of Year 6 sh | SOCI s Bepinning of Years EBood 7.00 5 Beginning of Year 4 Table 2.2. Bond Choices Deliverables: (DSS) As the consultant, your team needs to deliver a decision support system which can support the following functions. . Allow AnXin's manager to input in the interface of DSS system both the cash flow and construction cost (Table 2.1), as well as the investment choices (Table 2.2) to facilitate the management work; Allow manager to change in the interface of DSS system the cash flow or construction cost (Table 2.1), and solve the LP problem with the new cost in the real-world business scenario. Your DSS system will show the optimal solution and objective to facilitate the mannger's decision making. Allow manager to change the choices of investments (Table 2.2), e.g. rate of xbond changes, and the solve the LP problem with the new business scenario, Your DSS system will show the optimal solution and objective to facilitate the manager's decision making. Discuss: given the specific abstraction / assumption you assumed in the project and the DSS implementation, what are the limitations of your LP problem formulate? What are the limitations of your DSS implementation