Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows:

				Capital Requirements ($)
Alternative	Net Present Value ($)			Year 1		Year 2		Year 3
Limited warehouse expansion	4,000			3,000		1,000		4,000
Extensive warehouse expansion	6,000			2,500		3,500		3,500
Test market new product	10,500			6,000		4,000		5,000
Advertising campaign	4,000			2,000		1,500		1,800
Basic research	8,000			5,000		1,000		4,000
Purchase new equipment	3,000			1,000		500		900
Capital funds available				10,500		7,000		8,750

(a)

Develop and solve an integer programming model for maximizing the net present value.

Max

x1

+

x2

+

x3

+

x4

+

x5

+

x6

s.t.

x1

+

x2

+

x3

+

x4

+

x5

+

x6

- Select your answer -=Item 13

$

Year 1

x1

+

x2

+

x3

+

x4

+

x5

+

x6

- Select your answer -=Item 21

$

Year 2

x1

+

x2

+

x3

+

x4

+

x5

+

x6

- Select your answer -=Item 29

$

Year 3

x1, x2, x3, x4, x5, x6

=

0, 1

Select the correct answers below.

Optimal Solution:

x1	- Select your answer -01Item 31
x2	- Select your answer -01Item 32
x3	- Select your answer -01Item 33
x4	- Select your answer -01Item 34
x5	- Select your answer -01Item 35
x6	- Select your answer -01Item 36

Net Present Value: $

(b)

Assume that only one of the warehouse expansion projects can be implemented. Modify your model of part (a). Which of the following constraint must be added to the model?

(i)	x1 = x2
(ii)	x1 + x2 1
(iii)	x1 + x2 1
(iv)	None of the above.

- Select your answer -Option (i)Option (ii)Option (iii)Option (iv)Item 38

(c)

Suppose that, if test marketing of the new product is carried out, the advertising campaign also must be conducted. Modify your formulation of part (b) to reflect this new situation. Which of the following constraint must be added to the model in part (b)?

(i)	x3 x4
(ii)	x4 x3
(iii)	x3 + x4 1
(iv)	x3 + x4 1

- Select your answer -Option (i)Option (ii)Option (iii)Option (iv)Item 39