Rosenberg Land Development ( RLD) is a developer of condominium properties in the Southwest United States. RLD has recently acquired a 40.625 acre site outside Phoenix, Arizona. Zoning restrictions allow at most 8 units per acre. Three types of condominiums are planned: one, two, and three bedroom units. The average construction costs for each type of unit are $ 450,000, $ 600,000, and $ 750,000, respectively. These units will generate a net profit of 10%. The company has equity and loans totaling $ 180 million dollars for this project. From prior development projects, senior managers have determined that there must be a minimum of 15% one bedroom units, 25% two bedroom units, and 25% three bedroom units.
a. Develop a linear optimization model to determine how many of each type of unit the developer should build.
b. Implement your model on a spreadsheet and find an optimal solution.
c. Explain the value of increasing the budget for the project.