New Exercise Bank Content Qu$.06-12$

Maureen Laird is the chief financial officer for the Alva Electric Company, a major public utility in the Midwest. The company has

scheduled the construction of new hydroelectric plants $5,10,$ and $20$ years from now to meet the needs of the growing population in

the region served by the company. To cover the construction costs, Maureen needs to invest some of the company's money now to

meet these future cash flow needs. Maureen may purchase only three kinds of financial assets, each of which costs $$1$ million per unit.

Fractional units may be purchased. The assets produce income $5,10,$ and $20$ years from now, and that income is needed to cover

minimum cash flow requirements in those years, as shown in the following table.

Click here for the Excel Data File

Formulate a linear programming model for this problem on a spreadsheet. Use Solver to find an optimal solution.

a$.$ Determine the mix of investments in these assets that will cover the cash flow.

Note: Enter $"0"$ if a particular asset is not invested in$.$

b$.$ Determine the total cost.

Note: Enter your answer in millions.

Total cost

million