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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 retums, the capital requirements, and the available capital funds over the next three years are summarized as follows. Capital Requirements (S) Alternative Number Alternative Net Present Value (5) Year 1 Year 2 Year 3 1 Limited warehouse expansion 3,500 3,000 1,000 4,000 2 Extensive warehouse expansion 6,500 2,500 2,500 3,500 Test market new product 10,000 6,000 4.000 5,000 4 Advertising campaign 4,500 2.000 1,500 1,800 5 Basic research 7,500 5,000 1,000 4,000 Purchase new equipment 3,500 1,000 500 900 Capital funds available 10,500 7,000 8,750 (a) Develop an Integer programming model for maximizing the net present value (in s). Le x,- at investment alternative / Is selected for 1 - 1,2,3,4,5,6. ) 0 otherwise Max 5.t. Year 1 Year 2 2 Year 3 According to this model, what is the maximum nel present value (in $)? $ 18000 (b) Assume that only one of the warehouse expansion projects can be implemented. Modify your model from part (a). In addition to the constraints from part (a), what additional constraint should be added to the integer programming model? 18000 X According to this model, what is the maximum net present value (in $)7 $ 18000 (C) Suppose that if test marketing of the new product is carried out, the advertising campaign also must be conducted. Modify your formulation from part (b) to reflect this new situation. In addition to the constraints from part (a) and part (b), what additional constraint should be added to the integer programming madel? According to this model, what is the maximum net present value (in $)? 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 retums, the capital requirements, and the available capital funds over the next three years are summarized as follows. Capital Requirements (S) Alternative Number Alternative Net Present Value (5) Year 1 Year 2 Year 3 1 Limited warehouse expansion 3,500 3,000 1,000 4,000 2 Extensive warehouse expansion 6,500 2,500 2,500 3,500 Test market new product 10,000 6,000 4.000 5,000 4 Advertising campaign 4,500 2.000 1,500 1,800 5 Basic research 7,500 5,000 1,000 4,000 Purchase new equipment 3,500 1,000 500 900 Capital funds available 10,500 7,000 8,750 (a) Develop an Integer programming model for maximizing the net present value (in s). Le x,- at investment alternative / Is selected for 1 - 1,2,3,4,5,6. ) 0 otherwise Max 5.t. Year 1 Year 2 2 Year 3 According to this model, what is the maximum nel present value (in $)? $ 18000 (b) Assume that only one of the warehouse expansion projects can be implemented. Modify your model from part (a). In addition to the constraints from part (a), what additional constraint should be added to the integer programming model? 18000 X According to this model, what is the maximum net present value (in $)7 $ 18000 (C) Suppose that if test marketing of the new product is carried out, the advertising campaign also must be conducted. Modify your formulation from part (b) to reflect this new situation. In addition to the constraints from part (a) and part (b), what additional constraint should be added to the integer programming madel? According to this model, what is the maximum net present value (in $)
