Qs: Project investment problem

The project development division of Cyber.IL, a major company in the field of cyber security, has allocated $160 million to invest in new projects in 2024 (any leftovers are going to roll over to investments in 2025). The company is considering investing in one of the following five projects: (1) Implementing new AI technology; (2) developing cloud security via blockchain technology; (3) Developing high performance computing; (4) Implement industrial control system; and (5) Developing new Internet of Things devices.

The project development division would like to decide which projects to invest in and how much to invest in each project. Each project net profit estimation and cost per project are presented in the following table (all numbers are in million dollars):

In $M AI Blockchain Computing Control IoT Net profit 10 17 16 8 14 Cost 48 96 80 32 64

Each project also has different staffing requirements. AI and Control require 3 workers each, Blockchain and IoT require 4 workers each, and Computing requires 2 workers. The division has 20 workers overall to split among the different projects.

Assuming that the project development division can decide to invest in more than one project from the same type, what would be the optimal project investment portfolio that would yield maximum net profit?

To find 1.

2. 3.

4. 5. 6.

the optimal investment portfolio, answer the following questions: What is the objective?

What are the decision variables?

Set the problem on the spreadsheet Data, build a corresponding model, and solve it. What is the optimal value of your objective?

What is the optimal investment portfolio?

Is staffing a binding constraint? Explain.

Generate a sensitivity analysis report and use it to answer the following questions.

• Which investment has 0 reduced cost? Explain why.
• What is the reduced cost of the Blockchain project? Explain its sign.
• What is the economic value of another dollar of investment budget?

1. Assume, now, that the project development division can only invest in at most one project of each type (partial investments in projects are not allowed). Solve and answer: What is the optimal investment portfolio?
2. Following the model you built to answer question 6, answer: What is the economic value of another $20M of investment budget? What method did you use to find the answer?
3. Of the five suggested projects, Blockchain and IoT are considered top priority projects. Cyber.IL headquarters has instructed the project development division to invest in at least one top priority project. To ensure that the portfolio is diversified, they also require that at least three projects out of the total five projects will be selected. Use solver to answer: what is the optimal investment portfolio under the new restrictions?
4. Following the model you built to answer question 8, answer: What is the economic value of another $40M of investment budget? What method did you use to find the answer?

Project investment
In $M	AI	Blockchain	Computing	Control	IoT
Net Profit	10	17	16	8	14
Cost	48	96	80	32	64
Available for investment (in $M)	160
Objective
Decisions
Calculations