Reconsider the California Manufacturing Co. example presented in Sec. 12.1. The mayor of San Diego now has contacted the company’s president to try to persuade him to build a factory and perhaps a warehouse in that city. With the tax incentives being offered the company, the president’s staff estimates that the net present value of building a factory in San Diego would be $7 million and the amount of capital required to do this would be $4 million. The net present value of building a warehouse there would be $5 million and the capital required would be $3 million. (This option would be considered only if a factory also is being built there.)
The company president now wants the previous OR study revised to incorporate these new alternatives into the overall problem. The objective still is to find the feasible combination of investments that maximizes the total net present value, given that the amount of capital available for these investments is $10 million.
(a) Formulate a BIP model for this problem.
(b) Display this model on an Excel spreadsheet.
(c) Use the computer to solve this model.