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Business Analytics 4th Edition Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann - Solutions
16. Maximizing Minimum Return of Investment. Reconsider the data in Problem 15.Construct a model that maximizes the minimum return achieved over the five scenarios provided. Solve your model to find the optimal portfolio.
15. Alternative Markowitz Portfolio Model. A second version of the Markowitz portfolio model maximizes expected return subject to a constraint that the variance of the portfolio must be less than or equal to some specified amount. Consider again the Hauck Financial Service data given in Section
14. Markowitz Portfolio Model. Consider the stock return scenarios for Apple Computer(APPL), Advanced Micro Devices (AMD), and Oracle Corporation (ORCL) shown in the following table:Wedding 1 2 3 4 5 6 7 8 APPL 239.80 10.10 124.90 151.80 258.30 14.30 241.90 57.10 AMD 242.50 13.60 56.90 36.70 234.80
13. Wedding Planning. The distance between two cities in the United States can be approximated by the following formula, where lat1 and long2 are the latitude and longitude of city 1 and lat2 and long2 are the latitude and longitude of city 2:69 (lat1 lat2 ) (long long )2 1 2 2 2 1 2 Ted’s
12. Cell Tower Location. TN Communications provides cellular telephone services. The company is planning to expand into the Cincinnati area and is trying to determine the best location for its transmission tower. The tower transmits over a radius of 10 miles.The locations that must be reached by
11. Tool Bin Location. Let us consider again the data from the LaRosa tool bin location problem discussed in Section 14.3.a. Suppose we know the average number of daily trips made to the tool bin from each production station. The average number of trips per day are 12 for fab rication, 24 for
10. Product Pricing. Phillips Inc. produces two distinct products, A and B. The products do not compete with each other in the marketplace; that is, neither cost, price, nor demand for one product will impact the demand for the other. Phillips’ analysts have collected data on the effects of
9. Economic Order Quantity. The economic order quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost, and the cost of goods ordered. The assumptions for that model are that only a single
8. Chair Manufacturing. Andalus Furniture Company has two manufacturing plants, one at Aynor and another at Spartanburg. The cost in dollars of producing a kitchen chair at each of the two plants is given here. The cost of producing Q1 chairs at Aynor is 75 1 5 1 100 Q 1 Q2 1 and the cost of
7. Exponential Smoothing. Many forecasting models use parameters that are estimated using nonlinear optimization. A good example is the Bass model introduced in this chapter.Another example is the exponential smoothing forecasting model which is a common forecasting model used in practice. For
6. Baseball Glove Production Planning. Heller Manufacturing has two production facilities that manufacture baseball gloves. Production costs at the two facilities differ because of varying labor rates, local property taxes, type of equipment, capacity, and so on. The Dayton plant has weekly costs
5. Pricing Cameras. Jim’s Camera shop sells two high-end cameras, the Sky Eagle and Horizon. The demands for these two cameras are as follows:DS 5demand for the Sky Eagle, PS is the selling price of the Sky Eagle, DH is the demand for the Horizon, and PH is the selling price of the Horizon.222
1. Media Planning. GreenLawns provides a lawn fertilizing and weed control service.The company is adding a special aeration treatment as a low-cost extra service option that it hopes will help attract new customers. Management is planning to promote this
25. Second Best Manufacturing Locations. Refer to Problem 24. Find the second-best solution. How does it compare to the optimal solution found in Problem 24? Why might the second-best solution be preferred?
24. Clean-Sheet Manufacturing Location. In this problem, we revisit the Martin-Beck plant location problem described in Problem 10. The management of Martin-Beck has decided to do a clean-sheet analysis. Rather than assume that the St. Louis plant is fixed as open, management wants to run a model
23. New Product Design. Wegryn Consumer Goods (WCG) is considering entering the dish soap market with a new product it has yet to design. Using conjoint analysis, WCG has estimated part-worth utilities for 110 survey respondents for the following four attributes for dish soap:•
22. Mutual Fund Portfolio Planning. Dave has $100,000 to invest in 10 mutual fund alternatives with the following restrictions. For diversification, no more than $25,000 can be invested in any one fund. If a fund is chosen for investment, then at least$10,000 will be invested in it. No more than
21. Service Facility Location. East Coast Trucking provides service from Boston to Miami using regional offices located in Boston, New York, Philadelphia, Baltimore, Washington, Richmond, Raleigh, Florence, Savannah, Jacksonville, Tampa, and Miami. The number of miles between the regional offices
20. Television Show Planning. John White is the program scheduling manager for the television channel CCFO. John would like to plan the schedule of television shows for next Wednesday evening.The table below lists nine shows under consideration. John must select exactly five of these shows for the
19. Subassembly Make Versus Buy. Roedel Electronics produces tablet computer accessories, including integrated keyboard tablet stands that connect a keyboard to a tablet device and holds the device at a preferred angle for easy viewing and typing. Roedel produces two sizes of integrated keyboard
18. Fabrics Make Versus Buy. The Calhoun Textile Mill is in the process of deciding on a production schedule. It wishes to know how to weave the various fabrics it will produce during the coming quarter. The sales department has confirmed orders for each of the 15 fabrics produced by Calhoun. These
17. Security System Design. The Bayside Art Gallery is considering installing a video camera security system to reduce its insurance premiums. A diagram of Bayside’s eight exhibition rooms is shown in the figure in the next page; the openings between the rooms are numbered 1 to 13. A security
16. Product Design. Burnside Marketing Research conducted a study for Barker Foods on several formulations for a new dry cereal. Three attributes were found to be most influential in determining which cereal had the best taste: ratio of wheat to corn in the cereal flake, type of sweetener (sugar,
15. Bank Teller Scheduling. The Northside Bank is working to develop an efficient work schedule for full-time and part-time tellers. The schedule must provide for efficient operation of the bank, including adequate customer service, employee breaks, and so on. On Fridays, the bank is open from 9:00
14. Population Reach. Consider again the CHB, Inc. problem described in Problem 12.Suppose only a limited number of PPBs can be placed. CHB would like to place this limited number of PPBs in counties so that the allowable branches can reach the maximum possible population. The file CHBPop contains
13. Alternative Optima for Bank Location Planning. For Problem 12, use equation(13.1) to determine whether your solution to Problem 12 is unique. If your solution is not unique, use equation (13.1) iteratively to find all alternative optimal solutions. How many are there?
12. Bank Location Planning. CHB, Inc., a bank holding company, is evaluating the potential for expanding into the State of Ohio. State law permits establishing branches in any county that is adjacent to a county in which a PPB (principal place of business)is located. The following map shows the
11. Cloud Services Capacity Planning. Galaxy Cloud Services operates several data centers across the United States containing servers that store and process the data on the Internet. Suppose that Galaxy Cloud Services currently has five outdated data centers:one each in Michigan, Ohio, and
10. Manufacturing Plant Location. The Martin-Beck Company operates a plant in St.Louis with an annual capacity of 30,000 units. Product is shipped to regional distribution centers located in Boston, Atlanta, and Houston. Because of an anticipated increase in demand, Martin-Beck plans to increase
9. Carrier Selection. Offhaus Manufacturing produces office supplies but outsources the delivery of its products to third-party carriers. Offhaus ships to 20 cities from its Dayton, Ohio, manufacturing facility and has asked a variety of carriers to bid on its business. Seven carriers have
8. Multi-product Production Planning. Hart Manufacturing makes three products.Each product requires manufacturing operations in three departments: A, B, and C. The labor-hour requirements, by department, are as follows:Department Product 1 Product 2 Product 3 A 1.50 3.00 2.00 B 2.00 1.00 2.50 C
7. Locating Police Substations. Grave City is considering the relocation of several police substations to obtain better enforcement in high-crime areas. The locations under consideration together with the areas that can be covered from these locations are given in the following table:Potential
6. Component Ordering. Morgan Inc. is planning the purchase of one of the component parts it needs for its finished product. The anticipated demands for the component for the next 12 periods are shown in the following table. The cost to order the component(labor, shipping, and paperwork) is $150.
5. Investment Net Present Value. Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three
4. Real Estate Project Selection. Brooks Development Corporation (BDC) faces the following capital budgeting decision. Six real estate projects are available for investment.The net present value and expenditures required for each project (in millions of dollars) are as follows:Project 1 2 3 4 5 6
3. Minimizing Scrap. STAR Co. provides paper to smaller companies with volumes that are not large enough to warrant dealing directly with the paper mill. STAR receives 100-feet-wide paper rolls from the mill and cuts the rolls into smaller rolls of widths 12, 15, and 30 feet. The demands for these
2. Nurse Scheduling. Hospital administrators must schedule nurses so that the hospital’s patients are provided adequate care. At the same time, careful attention must be paid to keeping costs down. From historical records, administrators can project the minimum number of nurses required to be on
1. Machine Tool Production Planning. King City Inc. manufactures machine tools. The production planner who oversees the production of two of King City’s machines needs to determine how many of each to produce this month. The two machines, TopLathe and BigPress, each require a certain common
5. The asset allocation model you developed may be useful in modifying the portfolios for all of the firm’s clients whenever the anticipated yields for the three funds are periodically revised. What is your recommendation as to whether use of this model is possible?
4. Assume that the client expressed some concern about having too much money in the growth fund. How would the original recommendation change if the amount invested in the growth fund is not allowed to exceed the amount invested in the income fund?
3. Refer again to the original situation, in which the client’s risk index was assessed to be 0.05. How would your investment recommendation change if the annual yield for the growth fund were revised downward to 16% or even to 14%?
2. Assume that the client’s risk index could be increased to 0.055. How much would the yield increase, and how would the investment recommendation change?
1. Recommend how much of the $800,000 should be invested in each of the three funds. What is the annual yield you anticipate for the investment recommendation?
28. Skateboard Supply Chain. Sports of All Sorts produces, distributes, and sells high-quality handcrafted skateboards. Its supply chain consists of three factories that produce the skateboards (located in Detroit, Los Angeles, and Austin). The Detroit and Los Angeles facilities can produce 35,000
27. Ice Cream Recipes. McKinney’s Sweet Shop specializes in homemade candies and ice cream. McKinney’s produces its ice cream in house, in batches of 50 pounds. The first stage in ice cream making is the blending of ingredients to obtain a mix which meets pre-specified requirements on the
26. Energy Planning. Windsor Power can store power in a high-capacity battery. The battery has capacity to store 80 kWh (kilowatt hours). During a particular period, Windsor can buy or sell electricity at the market price known as LMP (locational marginal price). The maximum rate that power can be
25. Organic Food Supply-Chain Optimization. A produce company supplies organically grown apples to four regional specialty stores. After the apples are collected at the company’s orchard, they are transported to any of three preparation centers where they are prepared for retail (by undergoing
24. Cash Flow Management. A financial manager is managing a cash fund. His investment alternatives available are various certificates of deposit, also known as CDs, as listed in the following table:However, he also must ensure that sufficient funds are available to pay company expenditures over the
23. Developing a Risk-Averse Investment Portfolio. An investor wishes to invest$10,000 for the coming year and anticipates that the market will be in one of four different states at the end of the year. These states affect her investments in each of three possible stocks and a bond as shown in the
22. Scheduling Sports Equipment Production. Brendamore Sports produces footballs and soccer balls and must plan on how many to produce each month for the next six months. The file Brendamore contains demand forecasts, as well as the production costs and inventory holding costs, for the next six
21. Fitness Bracelet Distribution. Orion Fitness produces bracelets with an embedded chip that tracks its wearer’s activities. Orion has plants in Denver and Jacksonville.Bracelets produced at either plant may be shipped to either of the firm’s two regional warehouses, which are located in
20. Alternative Optimal Plan for Make Versus Buy. Refer to the Calhoun Textile Mill production problem described in Problem 19. Use the procedure described in Section 12.7 to try to find an alternative optimal solution. If you are successful, discuss the differences in the solution you found versus
19. Make Versus Buy for Textiles. The Calhoun Textile Mill is in the process of deciding on a production schedule. It wishes to know how to weave the various fabrics it will produce during the coming quarter. The sales department has confirmed orders for each of the 15 fabrics produced by Calhoun.
18. Power Distribution. Aggie Power Generation supplies electrical power to residential customers for many U.S. cities. Its main power generation plants are located in Los Angeles, Tulsa, and Seattle. The following table shows Aggie Power Generation’s major residential markets, the annual demand
17. Alternative Optimal Distribution Plan. Refer to the transportation problem described in Problem 16. Use the procedure described in Section 12.7 to try to find an alternative optimal solution.
16. Distribution Plan to Minimize Cost. Consider the following network representation of a transportation problem:The supplies, demands, and transportation costs per unit are shown on the network.What is the optimal (cost minimizing) distribution plan?
12. Seafood Buying Strategy. The Atlantic Seafood Company (ASC) is a buyer and distributor of seafood products that are sold to restaurants and specialty seafood outlets throughout the Northeast. ASC has a frozen storage facility in New York City that serves as the primary distribution point for
11. Credit Union Fund Allocation. The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various
10. Production Planning. The management of Hartman Company is trying to determine the amount of each of two products to produce over the coming planning period. The following information concerns labor availability, labor utilization, and product profitability:Labor-Hours Required
9. Promotional Budgeting. The Westchester Chamber of Commerce periodically sponsors public service seminars and programs. Currently, promotional plans are under way for this year’s program. Advertising alternatives include television, radio, and online.Audience estimates, costs, and maximum media
8. Lithium Battery Production. Photon Technologies, Inc., a manufacturer of batteries for mobile phones, signed a contract with a large electronics manufacturer to produce three models of lithium-ion battery packs for a new line of phones. The contract calls for the following:Battery Pack
7. Component Manufacturing. Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows:Machine Component Shaper Grinder 1 6 4 2 4 5 3 4 2 The
6. Labor Allocation in a Design Project. Industrial Designs has been awarded a contract to design a label for a new wine produced by Lake View Winery. The company estimates that 150 hours will be required to complete the project. The firm’s three graphic designers available for assignment to this
5. Hotel Room Reservations. Round Tree Manor is a hotel that provides two types of rooms with three rental classes: Super Saver, Deluxe, and Business. The profit per night for each type of room and rental class is as follows:Rental Class Room Super Saver Deluxe Business Type I (Mountain View) $30
4. Bank Loan Funds Allocation. Adirondack Savings Bank (ASB) has $1 million in new funds that must be allocated to home loans, personal loans, and automobile loans.The annual rates of return for the three types of loans are 7% for home loans, 12%for personal loans, and 9% for automobile loans. The
3. Building a Financial Portfolio. Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients.A client who contacted B&R this past week has a maximum of $50,000 to invest. B&R’s investment advisor decides to
2. Advertising Budget Allocation. The Sea Wharf Restaurant would like to determine the best way to allocate a monthly advertising budget of $1,000 between newspaper advertising and radio advertising. Management decided that at least 25% of the budget must be spent on each type of media and that the
1. Sporting Goods Product Mix. Kelson Sporting Equipment, Inc. makes two types of baseball gloves: a regular model and a catcher’s model. The firm has 900 hours of production time available in its cutting and sewing department, 300 hours available in its finishing department, and 100 hours
5. Discuss how the financial planning model developed for Tom Gifford can be used as a template to develop a financial plan for any of the company’s employees.
4. Assume that Tom is willing to consider working 25 more years instead of 20 years.What is your assessment of this strategy if Tom’s goal is to have a portfolio worth$1,000,000?
3. What recommendations do you have for employees with a current profile similar to Tom’s after seeing the impact of the uncertainty in the annual salary growth rate and the annual portfolio growth rate?
2. Redesign the spreadsheet model to incorporate the random variability of the annual salary growth rate and the annual portfolio growth rate into a simulation model.Assume that Tom is willing to use the annual investment rate that predicted a 20-year, $1,000,000 portfolio in part 1. Show how to
1. Without considering the random variability, extend the current worksheet to 20 years. Confirm that by using the constant annual salary growth rate and the constant annual portfolio growth rate, Tom can expect to have a 20-year portfolio of$772,722. What would Tom’s annual investment rate have
36. Effect of Additional Server on Restaurant Wait Time. Refer to the Burger Dome analysis in Problem 34. Burger Dome wants to consider the effect of hiring a second employee to serve customers (in parallel with the first employee). Use the file BurgerDomeTwoServers to complete a simulation model
35. Effect of Service Time Distribution on Restaurant Wait Time. One advantage of simulation is that a simulation model can be altered easily to reflect a change in the assumptions. Refer to the Burger Dome analysis in Problem 34. Assume that the service time is more accurately described by a
34. Wait Time Analysis at a Restaurant. Burger Dome is a fast-food restaurant currently evaluating its customer service. In its current operation, an employee takes a customer’s order, tabulates the cost, receives payment from the customer, and then fills the order. Once the customer’s order is
33. Modeling Stock Prices. Over the past year, a financial analyst has tracked the daily change in the price per share of common stock for a major oil company. The financial analyst wants to develop a simulation model to analyze the stock price at the end of the next quarter. Assume 63 trading days
32. Hedging Currency Risk. A European put option on a currency allows you to sell a unit of that currency at the specified strike price (exchange rate) at a particular point in time after the purchase of the option. For example, suppose Press Teag Worldwide (from Section 11.4) purchases a
31. Wedding Attendance. The wedding date for a couple is quickly approaching, and the wedding planner must provide the caterer an estimate of how many people will attend the reception so that the appropriate quantity of food is prepared for the buffet. The following table contains information on
30. Matriculation Yield at a University. As admissions director for an exclusive executive MBA program which takes place on Necker Island in the Caribbean, Richard Branson must decide which applicants should receive admission offers. This is a difficult decision-making problem, as an applicant may
29. Financial Analysis of Restaurant. Gorditos sells a variety of Mexican-inspired cuisine for which tortillas are often the main ingredient. Assume that each customer places an order requiring one tortilla with a 75% probability independent of other customers’orders. The other 25% of customers
28. Product Adoption and Sales Bonus. Bianca Peterson is a marketing engineer for Hexagon Composites, a company which sells carbon composite storage tanks. In an effort to gain product adoptions from customers, Bianca goes on sales trips (often to foreign countries). For each of 120 previous sales
27. Newsvendor Problem for Anime Magazine. Young entrepreneur Fan Bingbing has launched a business venture in which she uses stories submitted by university students as the basis for comics in a monthly anime-style magazine. Based on market research, Fan estimates that average monthly demand will
26. World Series in Major League Baseball. Major League Baseball’s World Series is a maximum of seven games, with the winner being the first team to win four games.Assume that the Atlanta Braves are playing the Minnesota Twins in the World Series and that the first two games are to be played in
25. More Jackpot Soap. Refer to the Jackpot soap scenario in Problem 24. After the sale of the original 1,000 bars of soap, Jackpot soap went viral, and the soap has become wildly popular. Production of the soap has been ramped up so that now millions of bars have been produced. However, the
24. Distribution of Money in Jackpot Soap Bars. A creative entrepreneur has created a novelty soap called Jackpot. Inside each bar of Jackpot soap is a rolled-up bill of U.S.currency. There are 1,000 bars of soap in the initial offering of the soap. Although the denomination of the bill inside a
23. Snowfall Promotion. To boost holiday sales, Ginsberg jewelry store is advertising the following promotion: “If more than five inches of snow fall in the first three days of the year (January 1 through January 3), all purchases made between Thanksgiving and Christmas are free!” Based on
22. Blackjack Card Game. Blackjack, or 21, is a popular casino game that begins with each player and the dealer being dealt two cards. The value of each hand is determined by the point total of the cards in the hand. Face cards and 10s count 10 points, aces can be counted as either 1 or 11 points,
21. Airplane Maintenance. Steve Austin is the fleet manager for SharePlane, a company that sells fractional ownership of private jets. SharePlane must carefully maintain their jets at all times. If a jet breaks down, it must be repaired immediately. Even if a jet functions well, it must be
20. Music Concert Event Management. At a local university, the Student Commission on Programming and Entertainment (SCOPE) is preparing to host its first music concert of the school year. To successfully produce this music concert, SCOPE has to complete several activities. The following table lists
19. Flu Vaccine Ordering. OuRx, a retail pharmacy chain, is faced with the decision of how much flu vaccine to order for the next flu season. OuRx has to place a single order for the flu vaccine several months before the beginning of the season because it takes four to five months for the supplier
18. Product Adoption. Orange Tech (OT) is a software company that provides a suite of programs that are essential to everyday business computing. OT has just enhanced its software and released a new version of its programs. For financial planning purposes, OT needs to forecast its revenue over the
17. Hybrid Car Analysis. You are considering the purchase of a new car and are weighing the choice between a Ford Fusion Hybrid sedan (which assists a gasoline engine with an electric motor powered via regenerative braking) and the Ford Fusion Non-Hybrid sedan (just a standard gasoline engine). The
16. Project Bidding. Jonah Arkfeld, a building contractor, is preparing a bid on a new construction project. Two other contractors will be submitting bids for the same project.Jonah has analyzed past bidding practices and the requirements of the project to determine the probability distributions of
15. Holiday Toy Inventory Analysis. In preparing for the upcoming holiday season, Fresh Toy Company (FTC) designed a new doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping costs,
14. Project Management. A project has four activities (A, B, C, and D) that must be performed sequentially. The probability distributions for the time required to complete each of the activities are as follows:Activity Activity Time (Weeks) Probability A 5 0.25 6 0.35 7 0.25 8 0.15 B 3 0.20 5 0.55
13. Airline Overbooking. Allegiant Airlines is considering an overbooking policy for one of its flights. The airplane has 50 seats, but Allegiant is considering accepting more reservations than seats because sometimes passengers do not show up for their flights, resulting in empty seats. The
12. Simulating Stock Price. Suppose that the price of a share of a particular stock listed on the New York Stock Exchange is currently $39. The following probability distribution shows how the price per share is expected to change over a three-month period:Stock Price Change ($) Probability 22 0.05
11. Point Distribution in Basketball Game. The Iowa Wolves is scheduled to play against the Maine Red Claws in an upcoming game in the National Basketball Association(NBA) G League. Because a player in the NBA G League is still developing his skills, the number of points he scores in a game can
10. Analysis of Bid Amounts. Using the file LandSharkBeta, evaluate bid amounts from$1,229,000 to $1,329,000 in increments of $20,000 by building a table listing 95%confidence intervals around the average return and probability of winning the auction.Which of these bid amounts do you recommend?
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