ASHISH THAKOR A061 GROUP 2

DECISION MAKING MAJOR ASSIGNMENT GROUP 2

Q. 18a [Page 212] Objective is to minimize the monthly operating expense using formula: =(F4*F7)+(G4*G7)+(H4*H7) Subject to the following constraints: 1. $600,000 available to buy trucks <= 2. Monthly demand of gasoline is 550,000 gallons = 3. Not more than 15 new vehicles <= 4. At least 3 new Econo-Tankers to be purchased >= 3 15 600000

550,000

5. Super Tankers cannot be more than half of the total number of new tankers purchased <= =(F4+G4+H4)/2

Excel Model

ASHISH THAKOR A061 GROUP 2 Solver Function

Answer a. Number of trucks to be purchased: i. Super Tankers - 5 ii. Regular Lines - 2 iii. Econo-Tankers - 3 Sensitivity Analysis The optimal solution is valid for the following lower and upper ranges of investments:

Q. 18a [Page 212] Without the constraints of number of Super Tankers and Econo-Tankers: Excel Model

ASHISH THAKOR A061 GROUP 2 Solver Function

Answer a. Number of trucks to be purchased: i. Super Tankers - 8 ii. Regular Lines - 0 iii. Econo-Tankers 0

Sensitivity Analysis The optimal solution is valid for the following lower and upper ranges of investments:

ASHISH THAKOR A061 GROUP 2 Q.9 [Pg 207]a. Solve the revised linear programming model. What fraction of the portfolio should be invested in each type of security? b. How much should be invested in each type of security? c. What are the total earnings for the portfolio? d. What is the marginal rate of return on the portfolio? That is, how much more could be earned by investing one more dollar in the portfolio?

SOLUTION

a.

Let each decision variable, A, P, M, H and G, represent the fraction or proportion of the total investment placed in each investment alternative.

Max s.t.

.073A

+ .103P

+ .064M

+ .075H

+ .045G

A .5A -.5A

+ + -

P .5P .5P

+ + -

M .5M .5M .25M

+ + -

H .5H .5H .25H

1 0 0 0 0

-.6A

.4P A, P, M, H, G 0

Solution: Objective function = 0.079 with

Atlantic Oil Pacific Oil Midwest Oil

= 0.178 = 0.267 = 0.000

ASHISH THAKOR A061 GROUP 2 Huber Steel Government Bonds b. = 0.444 = 0.111

For a total investment of $100,000, we show

Atlantic Oil Pacific Oil Midwest Oil Huber Steel Government Bonds Total

= $17,800 = 26,700 = 0.000

= 44,400 = 11,100

$100,000

c.

Total earnings = $100,000 (.079) = $7,900

d.

Marginal rate of return is .079

ASHISH THAKOR A061 GROUP 2 Solved in excel :

Solver

ASHISH THAKOR A061 GROUP 2 Sensitivity report