Textbook Solution1

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HR MANAGEM 790
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Finance
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Oct 31, 2023
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Textbook Solutions Find solutions to your homework Search Practical Management Science | 4th Edition Chapter 4, Problem 61P (1) Problem An investor has $100,000 to invest right now (the beginning of year 1). The cash flows associated with five available investments are listed in the file P04_61.xlsx. For example, every dollar invested in A in year 1 yields $1.40 in year 4. In addition to these investments, the investor can invest as much money each year as he wants in CDs, which pay 3% interest. The investor wants to maximize his available cash in year 4. Assuming that he can put no more than $50,000 in any investment, develop an LP model to help the investor achieve his goal. Step-by-step solution Show all steps Step 1/10 Suppose we are given the following situation: there are various choices of investments it can make over the course of 4 years. We have $100,000 to invest initially and there are five investment options, A, B, C, D, and E. Uninvested money can go into a CD which
pays 3% interest. We can invest a maximum of $50,000 in any one investment. The outlays and returns are given in the following chart: Investment data A B C D E Year 1 - 1.00 - 1.00 - 1.00 Year 2 1.15 - 1.00 Year 3 1.28 - 1.00 Year 4 1.40 1.15 1.32 We enter the given information into the following spreadsheet model, using the following range names:
Where we have used arbitrary starting numbers for the dollars invested. Step 2/10 Next, we calculate the cash balances and flows. We start this by entering
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