Investment Plan Optimization (Oil and Gas Industry in the United States) Aglobal 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 COMPANY NAME (LOCATION) Trans-Texas Oil (Texas) British Petro (Foreign) Dutch Shell (Foreign) Houston Drilling (Texas) Lone Star Petro (Texas) San Dieago Oil (California) California Petro (California) EXPECTED ANNUAL RETURN (IN THOUSANDS) S 50 S 80 90 $120 $110 S 40 S 75 COST FOR BLOCK OF SHARES (IN THOUSANDS) $ 480 $ 540 $ 680 $1,000 $ 700 $ 510 $900 Constraints: . Total maximum investment is limited to 3,000$ 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 a) Please formulate your LP model and explain why our decision variables are binary (10 points) b) 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). For part b, please copy and paste the Excel solver output below: Investment Plan Optimization (Oil and Gas Industry in the United States) Aglobal 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 COMPANY NAME (LOCATION) Trans-Texas Oil (Texas) British Petro (Foreign) Dutch Shell (Foreign) Houston Drilling (Texas) Lone Star Petro (Texas) San Dieago Oil (California) California Petro (California) EXPECTED ANNUAL RETURN (IN THOUSANDS) S 50 S 80 90 $120 $110 S 40 S 75 COST FOR BLOCK OF SHARES (IN THOUSANDS) $ 480 $ 540 $ 680 $1,000 $ 700 $ 510 $900 Constraints: . Total maximum investment is limited to 3,000$ 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 a) Please formulate your LP model and explain why our decision variables are binary (10 points) b) 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). For part b, please copy and paste the Excel solver output below
