Fun n Games is a large discount toy store in Fashion City Mall. The store typically has
Question:
At the beginning of July the store can take out a six month loan that carries an 11% interest rate and must be paid back at the end of December. (The store cannot reduce its interest payment by paying back the loan early.) The store can also borrow money monthly at a rate of 5% interest per month. Money borrowed on a monthly basis must be paid back at the beginning of the next month. The store wants to borrow enough money to meet its cash flow needs while minimizing its cost of borrowing.
a. Formulate and solve a linear programming model for this problem.
b. What would be the effect on the optimal solution if the store could secure a 9% interest rate for a 6-month loan from anotherbank?
Step by Step Answer:
Operations Management Creating Value Along the Supply Chain
ISBN: 978-0470525906
7th Edition
Authors: Roberta S. Russell, Bernard W. Taylor