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Completely describe the affect of the following constraint: X3 + X5 = 1 14-17 You are considering the profitability consequences of 7 products that your

Completely describe the affect of the following constraint: X3 + X5 = 1

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14-17 You are considering the profitability consequences of 7 products that your company could produce. The production cost during each of the first 3 years of production, the capital available during the first 3 years for new production, and the NPV of each product are given in the following table: Production Costs Products NPV Return 1 st Year and Year 3rd Year $10,000 $1,000 $1.000 $2,000 $14,000 $500 $600 $1,000 $24,000 $5.500 $1,000 0 $23,000 $3,500 $500 $2.000 $12,000 $500 $500 0 $17,000 $500 $500 $3,000 7 $19,000 $1,000 $2,000 $3,000 Capital Available = $9,000 $6,000 $9,000 You want to find the production policy that maximizes the NPV. You must commit fully to any production decision made (in other words if you decide to produce a product you must produce it for 3 years). Decision Variables: Let Xi = 1 if you produce product i, 0 if you do not produce product i where i = 1 to 7

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