Question
Question 2- Only develop a mathematical model (there is no need to solve the model) Finco Investment Corporation must determine investment strategy for the firm
Question 2- Only develop a mathematical model (there is no need to solve the model) Finco Investment Corporation must determine investment strategy for the firm during the next three years. Currently (time 0), $100,000 is available for investment. Investments A, B, C, D, and E are available. The cash flow associated with investing $1 in each invest- ment is given in Table 38. For example, $1 invested in investment B requires a $1 cash outflow at time 1 and re- turns 50 at time 2 and $1 at time 3. To ensure that the company's portfolio is diversified, Finco requires that at most $75,000 be placed in any single investment. In addition to in- vestments A-E, Finco can earn interest at 8% per year by keeping uninvested cash in TABLE 38 D E 0 1 0 0 Cash Flow ($) at Time" 1 2 +0.50 +1 =1 F1.2 0 0 +0.50 0 0 -1 3 0 41 0 +1.9 +15 Note: Time 0 present, time 1 - 1 year from now: time 2-2 years from now: time 3-3 years from now. money market funds. Returns from investments may be immediately reinvested. For ex- ample, the positive cash flow received from investment C at time I may immediately be reinvested in investment B. Finco cannot borrow funds, so the cash available for invest- ment at any time is limited to cash on hand. Formulate an LP that will maximize cash on hand at time 3.
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To develop a mathematical model using Linear Programming LP to maximize Finco Investment Corporations cash on hand at time 3 well define variables constraints and objective function based on the given ...Get Instant Access to Expert-Tailored Solutions
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