1. Formulate the linear programming model. Clearly state your decision variables, objective function and all constraints. Use...
Question:
1. Formulate the linear programming model. Clearly state your decision variables, objective function and all constraints. Use fractions rather than percentages in your formulation of the objective function.
2. Solve the model using Microsoft Excel Solver. Attach the Microsoft Excel file as part of your submission.
3. Interpret the results from Microsoft Excel Solver, including the Sensitivity Report. What aspects of the computer-generated strategy are you in agreement with (based on a consideration of the sensitivity data)? What aspects of it would you disagree with? Why?
Energy Management Corporation (EMC) must decide its level of capital investment in the six energy ventures described below. EMC wishes to maximize its total expected return on a maximum total investment of $10,000,000. At least half of this must be in the United States, including Alaska. No more than 20% can be in sour crude and coal investments. In addition, allocations must at least meet the minimums specified in column three below. For example, investment in Wyoming Coal must be at least $1,000,000.
Venture (Location) | Expected Return | Minimum Investment | Primary Product |
Wyoming Coal | 75% | $1,000,000 | Coal |
Colorado Shale | 62% | $400,000 | Sour crude |
Prudhoe Bay Alaska | 125% | $1,000,000 | Sweet crude |
Mexico | 135% | None | Sweet crude |
Alberta Tar Sands | 80% | None | Sour crude |
Virginia Coal | 85% | $300,000 | Coal |