I need help developing a linear programming model to minimize thetotal dollars needed to be investednow to meet the expansion cash needs in the next 8 years.
Your corporation has just approved an 8-year expansion plan to grow its market share. The plan requires an influx of cash in each of the 8 years. Management wants to develop a financial plan to ensure the cash needed for the expansion will be available at thebeginning of each of the 8 years.
The corporation has the following investment options:
Security
Price per unit
Return Rate (%)
Years to Maturity
1
$1,200
10.255
5
2
$1,000
6.7550
6
3
$1,175
12.110
7
Savings Account
5.500
Each unit of security 1, 2, and 3 guarantees to pay $1,000 at maturity. Investments in these securities must take place only at the beginning of year 1 and will be held until maturity. Any funds not invested in securities will be invested in a savings account that pays the annual interest rates noted above.
The following table summarizes the cash needs for the expansion plan for each of the 8 years:
Year 1 = $250,000
Year 5 = $295,000
Year 2 = $300,000
Year 6 = $310,000
Year 3 = $225,000
Year 7 = $280,000
Year 4 = $235,000
Year 8 = $305,000
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