Question

SUinvestments is considering four investments. Investment 1 will yield a net present value (NPV) of $16,000; investment 2, an NPV of $22,000; investment 3, an NPV of $12,000; and investment 4, an NPV of $8,000. Each investment requires a certain cash outflow at the present time: investment 1, $5,000; investment 2, $7,000; investment 3, $4,000; and investment 4, $3,000. Note that no partial investments are allowed. Currently, $14,000 is available for investment. Formulate an integer linear programming model that will help SUinvestments maximize the total NPV obtained from investments 1–4. Solve this problem using Excel Solver. **I understand the constraints and objective function, but how would you formulate it excel?

Answer 1

Answer:

Formulation of the problem:-

X_j(j =1,2.3,4) = 1 (if investment j is made   ; 0 otherwise)

Objective function:-

Z= 16x₁ +22x₂ +12x₃ +8x₄

Subject to:-

5x₁ +7x₂ +4x₃ +3x₄≤ 14

X_j=0 or 1 (j=1,2,3,4)

Formulation of the problem:-

X_j(j =1,2.3,4) = 1 (if investment j is made   ; 0 otherwise)

Objective function:-

Z= 16x₁ +22x₂ +12x₃ +8x₄

Subject to:-

5x₁ +7x₂ +4x₃ +3x₄≤ 14

X_j=0 or 1 (j=1,2,3,4)