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LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS Vassilis Kostoglou E-mail: vkostogl@it.teithe.gr URL:

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Vassilis Kostoglou

E-mail: vkostogl@it.teithe.gr URL: www.it.teithe.gr/~vkostogl

1

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Case study 1

Portfolio selection

Case study 1 Portfolio selection  Select a portfolio package from a set of alternative investments

Select a portfolio package from a set of alternative investments

Maximization of the expected return or minimization of the risk

Available capital

Company’s policy

Duration of investments’ economic life, potential growth rate, danger, liquidity

2

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Return data

Expected annual return of investments

Return data Expected annual return of investments Investment Expected annual return rate (%) Share A –

Investment

Expected annual return rate (%)

Share A – manufacturing sector

15.4

Share B - manufacturing sector

19.2

Share C - food and beverage sector

18.7

Share D – food and beverage sector

13.5

Mutual fund E

17.8

Mutual fund Z

16.3

3

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Requirements

Total amount = € 90000

Requirements  Total amount = € 90000  Amount in shares of a sector no larger

Amount in shares of a sector no larger than 50% of total available

Amount in shares with the larger return of a sector less or equal to 80% of sector’s total amount

Amount in manufacturing company Β less or equal to 10% of the whole share amount

Amount in mutual funds less or equal to 25% of the amount in manufacturing shares

4

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution

Decision variables

Solution Decision variables x 1 = invested amount in share A of the manufacturing sector x

x 1 = invested amount in share A of the manufacturing sector x 2 = invested amount in share B of the manufacturing sector x 3 = invested amount in share C of the food and beverage sector x 4 = invested amount in share D of the food and beverage sector x 5 = invested amount in mutual fund E x 6 = invested amount in mutual fund Z

5

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Summary of the model

Summary of the model Max z = 0.154x 1 + 0.192x 2 + 0.187x 3 +

Max z = 0.154x 1 + 0.192x 2 + 0.187x 3 + 0.135 x 4 + 0.178x 5 + 0.163x 6

with constraints:

1.

x 1

+

2.

x 1

+

3.

4.

-0.8 x 1

+

5.

6.

-0.1 x 1

+

7.

-0.25 x 1

-

and x i >= 0, i = 1, 2,…, 6

x

2

+

x

2

0.2 x 2

 

0.9 x 2 0.25 x 2

-

0.2

0.1

x 3

x

x

x

3

3

3

+

+

-

-

x 4

x

4

0.8 x 4 0.1 x 4

+

+

x 5

x

5

+

+

x 6

x

6

<=

90.000

<=

45.000

<=

45.000

<=

0

<=

0

<=

0

<=

0

6

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Summary of results

Results of optimal solution

Summary of results Results of optimal solution Investment Amount invested Annual return rate expected (%) Total

Investment

Amount invested

Annual return rate expected (%)

Total expected return of the investment (4) = (2) x (3)

(1)

(2)

(3)

Share A

27900

15.4

4296.6

Share B

8100

19.2

1555.2

Share C

36000

18.7

6732

Share D

9000

13.5

1215

Mutual fund E

9000

17.8

1602

Mutual fund Z

0

16.3

0

Total

90000

17.11

15400.8

7

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with QSB

Solution with QSB 8 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with QSB 8 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

8

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

QSB+

|---QSB+-------------- Solution Summary for case study 1–--------------------| |----------------------------------------------------------------------------|

Maximum |

| Solution | ty Cost |Obj. Coef.|Obj. Coef.|Obj. Coef.|

| Number

| Variable | Variable |

|Opportuni-| Minimum | Current |

|

Name

| Variable | |Opportuni-| Minimum | Current | | Name

|----------+----------+----------+----------+----------+----------+----------|

| 1

|

X1

|

27900 |

0 | -.070777 |

.154 |

.1764444|

| 2

|

X2

|

8100 |

0

|

.154 |

.192 |

.394|

| 3

|

X3

|

36000 |

0

|

.1638 |

.187 |

M|

| 4

|

X4

|

9000 |

0 | 0.042199 |

.135 |

.187|

| 5

|

X5

|

9000 |

0

|

.163 |

.178 |

.2708001|

| 6

|

X6

|

0

|

.015 |

-M |

.163 |

.178|

|----------------------------------------------------------------------------|

|

|----------------------------------------------------------------------------| |----------------------------------------------------------------------------| |---------------- Constraint Summary for Ενότητα 3.2 ------------------------|

| Maximized OBJ = 15400.8 Iteration = 7 Elapsed CPU seconds = 0

|----------------------------------------------------------------------------|

|Constraint|Constraint|

 

Shadow

|

Surplus |

Minimum |

Current |

Maximum |

|

Number

|

Status

|

Price

|

|

R. H. S. |

R. H. S.

| R.

H. S. |

|----------+----------+----------+----------+----------+----------+----------|

| 1

|Tight (<)|

.16184 |

 

0 | 53035.71 |

90000 |

101250 |

| 2

|Loose (<)|

0

|

9000 |

 

36000 |

45000 |

M

|

| 3

|Tight

(<)| 0.018560 |

 

0

|

33750 |

45000 | 76363.63 |

| 4

|Loose (<)|

0

|

20700 |

-20700 |

0

|

M

|

| 5

|Tight (<)|

.052 |

 

0

|

-36000 |

0

|

9000 |

| 6

|Tight (<)|

.038 |

0

|

-8100 |

0

|

20700 |

| 7

|Tight (<)|

.01616 |

0

|

-11250 |

0 | 36964.29 |

|----------------------------------------------------------------------------|

9

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with LINDO

Solution with LINDO 10 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with LINDO 10 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

10

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

LINDO results (1)

LP OPTIMUM FOUND AT STEP OBJECTIVE FUNCTION VALUE

6

1)

15400.80

VARIABLE

VALUE

REDUCED COST

X1

27900.000000

0.000000

X2

8100.000000

0.000000

X3

36000.000000

0.000000

X4

9000.000000

0.000000

X5

9000.000000

0.000000

X6

0.000000

0.015000

ROW

SLACK OR SURPLUS

DUAL PRICES

1)

0.000000

0.161840

2)

9000.000000

0.000000

3)

0.000000

0.018560

4)

20700.000000

0.000000

5)

0.000000

0.052000

6)

0.000000

0.038000

7)

0.000000

0.016160

NO. ITERATIONS=

6

0.000000 0.038000 7) 0.000000 0.016160 NO. ITERATIONS= 6 11 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

11

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

LINDO results (2)

RANGES IN WHICH THE BASIS IS UNCHANGED:

VARIABLE

CURRENT COEF

OBJ COEFFICIENT RANGES

ALLOWABLE INCREASE

ALLOWABLE DECREASE

OBJ COEFFICIENT RANGES ALLOWABLE INCREASE ALLOWABLE DECREASE X1 0.154000 0.022444 0.224778 X2 0.192000

X1

0.154000

0.022444

0.224778

X2

0.192000

0.202000

0.038000

X3

0.187000

INFINITY

0.023200

X4

0.135000

0.052000

0.092800

X5

0.178000

0.092800

0.015000

X6

0.163000

0.015000

INFINITY

ROW

CURRENT RHS

RIGHTHAND SIDE RANGES ALLOWABLE INCREASE

ALLOWABLE DECREASE

1

90000.000000

11250.000000

36964.285156

2

45000.000000

INFINITY

9000.000000

3

45000.000000

31363.634766

11250.000000

4

0.000000

INFINITY

20700.000000

5

0.000000

9000.000000

36000.000000

6

0.000000

20700.000000

8100.000000

7

0.000000

36964.285156

11250.000000

12

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with Excel

Solution with Excel 13 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with Excel 13 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

13

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution window

Solution window 14 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution window 14 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

14

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Answer report

Answer report 15 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Answer report 15 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

15

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Sensitivity analysis

Sensitivity analysis 16 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Sensitivity analysis 16 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

16

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Case Study 2

Case Study 2 Financial programming problem  Initial amount: € 80000  Timeframe of investments’ decisions:

Financial programming problem

Initial amount: € 80000

Timeframe of investments’ decisions: 4 months

Two-month government bonds: return 3%

Three-month government bills: return 6.5%

Bank deposits: interest 1%

At the beginning of the 5 th month at least € 40000 are needed

Maximum amount in two-month or three-month bonds: € 32000

17

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Decision variables

Decision variables Β j = amount to be invested in government bonds at the beginning of

Β j = amount to be invested in government bonds at the beginning of the month j C j = amount to be invested in government bills at the beginning of the month j D j = amount to be invested in bank deposits at the beginning of the month j

18

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Objective function (total return)

Max z

=

 

0.03B 1

+

0.03B

+

0.065C 1

+

0.065C

+

0.01D 1

+

0.01C

Basic rule of capital flow:

2

2

2

+

+

+

0.03B

0.065C

0.01C

3

3

3

+

+

+

of capital flow : 2 2 2 + + + 0.03B 0.065C 0.01C 3 3 3

0.03B

0.065C

0.01D

4

4

4

Invested amount (start t) + Cash available (start t) = Available amount (end t-1) + Cash available (end t-1)

19

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Mathematical model

1.

2.

3.

-

4.

-

5.

6.

7.

8.

9.

10.

11.

12.

13.

+

B 1 B 2 1.03B 1 + 1.03B 2 +

+

1.03B 3 +

B

B

B

B

1

1

2

3

C 1

C 1

C

C

1

2

+

+

+

+

+

+

+

+

-

+

-

1.065C 1 +

C

C

B

B

1

2

3

4

B

B 3

2

B 4

C 2

C

2

C

3

+

+

D

1.01D

C

1.065C

1.01D

C

C

1

1

3

1

4

3

4

+

-

+

B i , C i , D i >= 0, for i = 1, 2, 3, 4

D 1.01D 2 + C

2

4

-

D 3

1.01D

3

+

D 4

i = 1, 2, 3, 4 D 1.01D 2 + C 2 4 - D 3

=

80000

=

0

=

0

=

0

>= 40000 <= 32000 <= 32000 <= 32000 <= 32000 <= 32000 <= 32000 <= 32000 <= 32000

20

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

An alternative objective function

An alternative objective function Maximization of final value: (the intermediate returns are included after their

Maximization of final value:

(the intermediate returns are included after their reinvestment)

Max Z = 1.03B 3 + 1.03B 4 + 1.065C 2 + 1.065C 3 + 1.065C 4 + 1.01D 4

21

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Summarized results

Results of optimal solution

Summarized results Results of optimal solution Investment Amount invested Investment return Total return (4) =

Investment

Amount invested

Investment return

Total return (4) = (2) x (3)

(1)

(2)

(3)

B

1

32000.000

0.03

960.000

B

3

19557.842

0.03

586.735

B

4

12442.157

0.03

373.265

C

1

32000.000

0.065

2080.000

C

4

32000.000

0.065

2080.000

D

1

16000.000

0.01

160.000

D

2

16160.000

0.01

161.600

D

3

29723.750

0.01

297.237

D

4

19658.834

0.01

196.588

   

Total

6895.425

22

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with QSB (1st)

Solution with QSB (1st) 23 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with QSB (1st) 23 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

23

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with QSB (2nd)

Solution with QSB (2nd) 24 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with QSB (2nd) 24 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

24

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with QSB (3rd alternative)

Solution with QSB (3rd alternative) 25 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with QSB (3rd alternative) 25 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

25

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

QSB+ (1-1)

QSB+ (1-1) |------------------ Solution Summary for case study 2------------------------|

|------------------ Solution Summary for case study 2------------------------| |----------------------------------------------------------------------------|

Maximum |

| Number

|Opportuni-|

| Variable | Variable |

| Solution | ty Cost |Obj. Coef.|Obj. Coef.|Obj. Coef.|

|----------+----------+----------+----------+----------+----------+----------|

Minimum |

Current |

|

Name

| 1

|

Β1

|

32000 |

0 | 0.029899 |

.03 |

M|

| 2

|

Β2

|

0

|

0 | 0.019901 |

.03 |0.03010097|

| 3

|

Β3

| 19557.84 |

0 | 0.019903 |

.03 |

.0401|

| 4

|

Β4

| 12442.16 |

0

|

.0199 |

.03 |0.07543910|

| 5

|

Γ1

|

32000 |

0 | 0.029606 |

.065 |

M|

| 6

|

Γ2

|

0 | 0.045348 |

-M |

.065 |

.1103485|

| 7

|

Γ3

|

0 | 0.010200 |

-M |

.065 |0.07520001|

| 8

|

Γ4

|

32000 |

0 | 0.054799 |

.065 |

M|

| 9

|

Δ1

|

16000 |

0

|

-M |

.01 |0.01010097|

| 10

|

Δ2

|

16160 |

0 | -9.90E19 |

.01 |0.02009801|

| 11

|

Δ3

| 29723.76 |

0 | 0.009900 |

.01 |0.02009603|

| 12

|

Δ4

| 19658.84 |

0 | -.999996 |

.01 |

.0199|

|----------------------------------------------------------------------------|

| Maximized OBJ = 6895.425 Iteration = 13 Elapsed CPU seconds = .0546875 |

|----------------------------------------------------------------------------|

26

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

QSB+ (1-2)

QSB+ (1-2) |---------------- Constraint Summary for case study 2 -----------------------|

|---------------- Constraint Summary for case study 2 -----------------------| |----------------------------------------------------------------------------|

|Constraint|Constraint| Shadow | Surplus | Minimum |

|

|

|----------+----------+----------+----------+----------+----------+----------|

| 1

|

| 3

| 4

40000 | 52689.76 |

32000 |

|

|

|

|

32000 | 44564.12 |

| 9

32000 | 44565.35 |

| 5

19360.4 |

80000 | 99168.72 |

Current |

Maximum |

S.

Number

|

Status

|

Price

|

|

R. H. S. | R. H. S.

| R. H.

|Tight (=)| 0.050909 |

|Tight

(=)|

.040504 |

|Tight (=)| 0.030201 |

|Tight (=)| 0.020001 |

|Tight (>)| -0.00990 |

|Tight (<)| 0.000100 |

|Tight (<)| 0.010098 |

|Loose (<)|

|Tight (<)| 0.009998 |

0 | 67805.39 |

0 | -12316.5 | 0 | -12439.7 | 0 | -12564.1 | 0 | 20052.96 | 0 | 19559.06 |

32000 |

0

0 | 12442.16 | 19557.84 |

0 | 12250.46 |

2

0

|

0 | 19554.01 | 0 | 19749.54 |

6

7

8

32000 |

32000 |

|

M

| 10

|Tight (<)|

0

|

0

|

32000 |

32000 |

M

|

| 11

|Tight (<)| 0.035393 |

0

|

0

|

32000 |

32000 |

| 12

|Tight (<)|

0

|

0

|

32000 |

32000 |

M

|

| 13

|----------------------------------------------------------------------------|

| Maximized OBJ = 6895.425 Iteration = 13 Elapsed CPU seconds = .0546875 | |----------------------------------------------------------------------------|

32000 | 44564.12 |

|Tight (<)| 0.044998 |

0 | 12250.46 |

27

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

QSB+ (2-1)

|--------------------- Solution Summary for case study 2---------------------| |----------------------------------------------------------------------------|

Maximum |

| Number

|Opportuni-|

| Variable | Variable |

| Solution | ty Cost |Obj. Coef.|Obj. Coef.|Obj. Coef.|

|----------+----------+----------+----------+----------+----------+----------|

Minimum |

Current |

|

Name

Minimum | Current | | Name | 1 | 2 | | Β1 Β2 | |

| 1

| 2

|

|

Β1

Β2

|

|

32000 | |

0

0 | -0.00010 | 0 | -0.01009 |

0

0 |0.00010097|

M|

|

| 3

|

Β3

| 19557.84 |

0 | 1.019904 |

1.03 |

1.0401|

| 4

|

Β4

| 12442.16 |

0

|

1.0199 |

1.03 | 1.075439|

| 5

|

Γ1

|

32000 |

0 | -0.03539 |

0

|

M|

| 6

|

Γ2

|

|

0 | 0.045348 |

-M |

1.065 | 1.110349|

| 7

|

Γ3

0 | 0.010200 |

-M |

1.065 |

1.0752|

| 8

|

Γ4

|

32000 |

0

|

1.0548 |

1.065 |

M|

| 9

|

Δ1

|

16000 |

0

|

-M |

0 |0.00010097|

| 10

|

Δ2

|

16160 |

0 | -9.90E19 |

0 |0.01009800|

| 11

|

Δ3

| 29723.76 |

0 | -0.00009 |

0 |0.01009602|

| 12

|

Δ4

| 19658.84 |

0 | 0.000001 |

1.01 |

1.0199|

|----------------------------------------------------------------------------|

| Maximized OBJ = 86895.42 Iteration = 13 Elapsed CPU seconds = 0.058593 |

|----------------------------------------------------------------------------|

|----------------------------------------------------------------------------|

28

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Alternative objective function QSB+ (2-2)

Alternative objective function QSB+ (2-2) |-------------------- Constraint Summary for case study 2--------------------|

|-------------------- Constraint Summary for case study 2--------------------|

|----------------------------------------------------------------------------|

|Constraint|Constraint| Shadow

|

Surplus |

Minimum |

Current |

Maximum |

|

Number

|

Status

|

Price

|

|

R. H. S. | R. H. S.

| R. H.

S.

|

|----------+----------+----------+----------+----------+----------+----------|

80000 | 99168.72 |

| 1

|Tight (=)| 1.050909 |

0 | 67805.39 |

| 2

|Tight

(=)| 1.040504 |

0 | -12316.5 |

0

|

19360.4 |

| 3

|Tight

(=)| 1.030202 |

0 | -12439.7 |

0 | 19554.01 |

| 4

|Tight

(=)| 1.020002 |

0 | -12564.1 |

0 | 19749.54 |

| 5

|Tight (>)| -0.00990 |

0 | 20052.96 |

40000 | 52689.76 |

| 6

|Tight (<)| 0.000100 |

0 | 19559.06 |

32000 |

32000 |

|

|

| 9

8

7

|Tight (<)| 0.010098 |

|Loose (<)|

|Tight (<)| 0.009998 |

32000 |

0 | 12442.16 | 19557.84 |

0 | 12250.46 |

0

|

32000 | 44565.35 |

|

32000 | 44564.12 |

32000 |

M

| 10

|Tight (<)|

0

|

0

|

32000 |

32000 |

M

|

| 11

|Tight (<)| 0.035393 |

0

|

0

|

32000 |

32000 |

| 12

|Tight (<)|

0

|

0

|

32000 |

32000 |

M

|

32000 | 44564.12 |

|----------------------------------------------------------------------------|

| 13

|Tight (<)| 0.044998 |

0 | 12250.46 |

| Maximized OBJ = 86895.42 Iteration = 13 Elapsed CPU seconds = 0.058593 |

|----------------------------------------------------------------------------|

|----------------------------------------------------------------------------|

29

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with Excel

Solution with Excel 30 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with Excel 30 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

30

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution window

Solution window 31 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution window 31 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

31

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Answer report

Answer report 32 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Answer report 32 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

32

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Sensitivity analysis

Sensitivity analysis 33 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Sensitivity analysis 33 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

33

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Case Study 3

Case Study 3 Investment choice problem in a limited capitals status  There are five independent

Investment choice problem in a limited capitals status

There are five independent investments

Maximization of the total present net value

Satisfaction of budget limitations

Cash inflows of the investments

Cash outflows of the investments

Each investment is divisible (investment rate)

34

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Inflow data

Cash inflows

Inflow data Cash inflows Year   Investment 1 2 3 4 5 1 38 11 17

Year

 

Investment

1

2

3

4

5

1

38

11

17

8

25

2

41

16

24

11

28

3

54

15

29

13

35

4

-

20

-

19

46

35

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Outflow data

Cash outflows

Outflow data Cash outflows Year   Investment   Amount 1 2 3 4 5 Available 0

Year

 

Investment

 

Amount

1

2

3

4

5

Available

0

34

10

16

9

31

55

1

13

5

8

4

10

28

2

14

6

10

6

13

30

3

17

6

11

7

12

37

4

-

8

-

5

16

30

36

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Table of cash flows

Cash flows of the problem

Table of cash flows Cash flows of the problem Year   Investment   10% discount rate

Year

 

Investment

 

10% discount rate of the interest

1

2

3

4

5

0

-34

-10

-16

-9

-31

1.000

1

25

6

9

4

15

0.909

2

27

10

14

5

15

30.826

3

37

9

18

6

23

0.751

4

-

12

-

14

30

0.683

NPV

38.14

18.67

17.26

12.83

32.79

 

Net Present Value 1 (NPV 1 ) = -34 *1 + 25 0.909 + 27 0.826 + 37 0.751 = 38.14

37

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Decision variables – Objective function x j = investment rate j (j = 1, 2,

Decision variables – Objective function

x j = investment rate j (j = 1, 2, 3, 4, 5) which is accepted in the optimum solution

Max z = 38.14x 1 + 18.67x 2 + 17.26x 3 +12.83x 4 + 32.79x 5

38

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Constraints

1.

34x 1

+

10x

2.

13x 1

+

5x

3.

14x 1

+

6x

4.

17 x 1

+

6x

5.

8x

6.

x 1

+

7.

-

x

8.

9.

10.

2

2

2

2

2

2

+

+

+

+

x j >= 0, j = 1, 2, …5

16x

8x

10x

11x

3

3

3

3

x 3

+

+

+

+

+

31x

4x

6x

7x

5x

4

4

4

4

4

x 4

+

+

+

+

+

31x 5 <=

10x 5 <= 13x 5 <=

<=

16x 5 <= <= <=

12x

5

x 5

x 5

55

28

30

37

30

1

1

1

1

1

<= <= <= 1 2 x 5 x 5 x 5 55 28 30 37 30

39

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Summarized results

Optimal solution results

Summarized results Optimal solution results Variable Variable value NPV (*€ 1000) Total NPV (*€ 1000) (4)

Variable

Variable value

NPV (*€ 1000)

Total NPV (*€ 1000) (4) = (2) x (3)

(1)

(2)

(3)

x

1

1

38.14

38.14

x

2

1

18.67

18.67

x

3

0.125

17.26

2.1575

x

4

1

12.83

12.83

x

5

1

32.79

0

 

Total

71.7975

40

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with QSB

Solution with QSB 41 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with QSB 41 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

41

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

QSB+

|-QSB+------------ Solution Summary for case study 3 ------------------------|

Maximum |

| Number

|----------+----------+----------+----------+----------+----------+----------|

| Variable | Variable |

| Solution | ty Cost |Obj. Coef.|Obj. Coef.|Obj. Coef.|

|Opportuni-| Minimum | Current |

|

Name

Coef.|Obj. Coef.| |Opportuni-| Minimum | Current | | Name | 1 | X1 | 1 |

| 1

|

X1

|

1

|

0

|

36.6775 |

38.14 |

M|

| 2

|

X2

|

1

|

0

|

10.7875 |

18.67 |

M|

| 3

|

X3

|

.125 |

0 | 16.92387 |

17.26 | 17.94823|

| 4

|

X4

|

1

|

0

|

9.70875 |

12.83 |

M|

| 5

|

X5

|

0 | .6512495 |

-M |

32.79 | 33.44125|

|----------------------------------------------------------------------------|

|

|----------------------------------------------------------------------------| |----------------- Constraint Summary for Ενότητα 3.4 -----------------------| |----------------------------------------------------------------------------|

| Maximized OBJ = 71.7975 Iteration = 5 Elapsed CPU seconds = 0

|Constraint|Constraint|

 

Shadow

|

Surplus |

Minimum |

Current |

Maximum |

|

Number

|

Status

|

Price

|

|

R. H. S. | R. H. S.

| R. H.

S.

|

|----------+----------+----------+----------+----------+----------+----------|

| 1

|Tight

(<)|

1.07875 |

0

|

53 |

55 |

59.4 |

| 2

|Loose (<)|

0

|

5

|

23 |

28 |

M

|

| 3

|Loose (<)|

0

|

2.75 |

27.25 |

30 |

M

|

| 4

|Loose (<)|

0

|

5.625 |

31.375 |

37 |

M

|

| 5

|Loose (<)|

0

|

17 |

13 |

30 |

M

|

| 6

|Tight (<)| 1.462499 |

0 | .6206896 |

1 | 1.058824 |

| 7

|Tight (<)|

7.8825 |

 

0

|

0

|

1

|

1.2 |

| 8

|Loose (<)|

0

|

.875 |

.125 |

1

|

M

|

| 9

|Tight

(<)|

3.12125 |

 

0

|

0

|

1 | 1.222222 |

| 10

|Loose (<)|

0

|

1

|

0

|

1

|

M

|

42

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with Excel

Solution with Excel 43 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with Excel 43 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

43

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution window

Solution window 44 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution window 44 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

44

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Answer window

Answer window 45 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Answer window 45 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

45

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Sensitivity analysis window

Sensitivity analysis window 46 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Sensitivity analysis window 46 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

46

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Case study 4

Case study 4 Advertising media selection Problem data Advertising media Cost of one view (in €)

Advertising media selection

Problem data

Advertising media

Cost of one view (in €)

Units of expected audience rate of one view

1. Friday – day

400

5000

2. Saturday – day

450

5500

3. Sunday – day

450

5700

4. Friday – night

500

7500

5. Saturday – night

550

8200

6. Sunday - night

550

8400

47

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Other relevant data

Other relevant data  Goal: Determination of views / records in order to maximize the total

Goal: Determination of views / records in order to maximize the total audience rate

Total available amount: € 45000

Maximum amount for Friday: € 11000

Maximum amount for Saturday: € 14400

Total daily view number: at least 20

Total nightly view number: at least 50% of the total

Maximum view number: each day 12, each night 18

48

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Decision variables

Χ 1 = number of views on Friday (day) Χ 2 = number of views on Saturday (day) Χ 3 = number of views on Sunday (day) Χ 4 = number of views on Friday (night) Χ 5 = number of views on Saturday (night) Χ 6 = number of views on Sunday (night)

on Saturday (night) Χ 6 = number of views on Sunday (night) 49 LINEAR PROGRAMMING –

49

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Mathematical model

Mathematical model Max z = 5000x 1 + 5500x 2 + 5700x 3 + 7500x 4

Max z = 5000x 1 + 5500x 2 + 5700x 3 + 7500x 4 + 8200x 5 + 8400x 6

with constraints:

1.

400x 1

+

2.

400x 1

3.

4.

x 1

+

5.

-0.5x 1

-

6.

x 1

7.

8.

9.

10.

11.

450x 2 + 450x 3

450x

2

x 2

0.5x 2

x

2

+

-

x 3

0.5x 3

x

3

+

+

+

x j >= 0, j = 1, 2, …5

500x 4

500x

4

0.5x 4

x

4

+

+

+

550x 5

550x 5

0.5x 5

x

5

+

+

+

550x 6

0.5x 6

x

6

<=

45000

<=

11000

<=

14400

>=

20

>=

0

<=

12

<=

12

<=

12

<=

18

<=

18

<=

18

50

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Results

Results Variable Value (number of views) Units of view audience rate Total audience rate of views

Variable

Value (number of views)

Units of view audience rate

Total audience rate of views (4) = (2) x (3)

(1)

(2)

(3)

x

1

5

5000

25000

x

2

10

5500

55000

x

3

12

5700

68400

x

4

18

7500

135000

x

5

18

8200

147600

x

6

18

8400

151200

 

Total

582200

51

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

Solution with QSB

Solution with QSB 52 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS
Solution with QSB 52 LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

52

LINEAR PROGRAMMING – CASE STUDIES AND SOLUTIONS

QSB+

|-QSB+------------ Solution Summary for case study 4 ------------------------|

|----------------------------------------------------------------------------|

Maximum |