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Problem 6

The document contains the output of a linear programming optimization problem solved by Excel's Solver tool. The objective is to maximize returns from investing in land and cattle given constraints on total investment and losses. The optimal solution is to invest $70,833.33 in land and $24,166.67 in cattle for total returns of $116,416.67. A sensitivity analysis shows the optimal solution is sensitive to changes in returns from cattle. Increasing the cattle return coefficient by 70% allows investing only in cattle. Increasing the loss coefficient for land also results in investing only in cattle.

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Lu Michael Raiven Uy
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76 views10 pages

Problem 6

The document contains the output of a linear programming optimization problem solved by Excel's Solver tool. The objective is to maximize returns from investing in land and cattle given constraints on total investment and losses. The optimal solution is to invest $70,833.33 in land and $24,166.67 in cattle for total returns of $116,416.67. A sensitivity analysis shows the optimal solution is sensitive to changes in returns from cattle. Increasing the cattle return coefficient by 70% allows investing only in cattle. Increasing the loss coefficient for land also results in investing only in cattle.

Uploaded by

Lu Michael Raiven Uy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Alexis Harrington

Maximize �=1.2𝑥_1+1.3𝑥_2
Subject to
𝑥_1+𝑥_2≤95000
−.18𝑥_1−.30𝑥_2≥−20000
𝑥_1≥0
𝑥_2≥0
Microsoft Excel 15.0 Answer Report
Worksheet: [Book1]02
Report Created: 22/09/2019 10:57:34 PM
Result: Solver found a solution. All Constraints and optimality conditions are satisfied.
Solver Engine
Engine: Simplex LP
Solution Time: 0.047 Seconds.
Iterations: 2 Subproblems: 0
Solver Options
Max Time Unlimited, Iterations Unlimited, Precision 0.000001, Use Automatic Scaling
Max Subproblems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume NonNegative

Objective Cell (Max)


Cell Name Original Value Final Value
$D$4 Maximize - 116,416.67

Variable Cells
Cell Name Original Value Final Value Integer
$B$5 Land - 70,833.33 Contin
$C$5 Cattle - 24,166.67 Contin

Constraints
Cell Name Cell Value Formula Status Slack
$D$8 inheritance 95000 $D$8<=$F$8 Binding 0
$D$9 losses -20000 $D$9>=$F$9 Binding 0
Microsoft Excel 15.0 Sensitivity Report
Worksheet: [Book1]02
Report Created: 22/09/2019 10:57:34 PM

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$5 Land 70833.33333 0 1.2 0.1 0.42
$C$5 Cattle 24166.66667 0 1.3 0.7 0.1

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$8 inheritance 95000 1.05 95000 16111.11111 28333.33333
$D$9 losses -20000 -0.833333333 -20000 2900 8500
Alexis Harrington

Land Cattle
Maximize 1.20 1.30
116,416.67
70,833.33 24,166.67

Constraints
inheritance 1.00 1.00 95,000.00 <= 95,000.00
losses - 0.18 - 0.30 - 20,000.00 >= - 20,000.00

02 Alexis will maximize her investment if she will invest $70, 833,33
in land and $24,166.67 in Cattle
Alexis Harrington

Land Cattle
Maximize 1.20 2.00
133,333.33
- 66,666.67

Constraints
inheritance 1.00 1.00 66,666.67 <= 95,000.00
losses - 0.18 - 0.30 - 20,000.00 >= - 20,000.00

03 for Alexis to invest only in Cattle, the firm needs to increase


their return by 70%. It is visible in our sensitivity analysis where
our allowable increase to have an effect to our solution is .70.
Alexis Harrington

Land Cattle
Maximize 1.20 1.30
116,416.67
70,833.33 24,166.67

Constraints
inheritance 1.00 1.00 95,000.00 <= 95,000.00
losses - 0.18 - 0.30 - 20,000.00 >= - 20,000.00

04 Yes
Microsoft Excel 15.0 Sensitivity Report
Worksheet: [Book1]02
Report Created: 22/09/2019 10:57:34 PM

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$5 Land 70833.33333 0 1.2 0.1 0.42
$C$5 Cattle 24166.66667 0 1.3 0.7 0.1

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$8 inheritance 95000 1.05 95000 16111.11111 28333.33333
$D$9 losses -20000 -0.833333333 -20000 2900 8500

05 Based on the sensitivity analysis. For every dollar Alexis will invest $1.05 will be added
to the returns. But @ the maximum increase of $16,111.11
Microsoft Excel 15.0 Answer Report
Worksheet: [Book1]06
Report Created: 22/09/2019 11:11:26 PM
Result: Solver found a solution. All Constraints and optimality conditions are satisfied.
Solver Engine
Engine: Simplex LP
Solution Time: 0.031 Seconds.
Iterations: 1 Subproblems: 0
Solver Options
Max Time Unlimited, Iterations Unlimited, Precision 0.000001, Use Automatic Scaling
Max Subproblems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume NonNegative

Objective Cell (Max)


Cell Name Original Value Final Value
$D$4 Maximize 116,416.67 86,666.67

Variable Cells
Cell Name Original Value Final Value Integer
$B$5 Land 70,833.33 - Contin
$C$5 Cattle 24,166.67 66,666.67 Contin

Constraints
Cell Name Cell Value Formula Status Slack
$D$8 inheritance 66,666.67 $D$8<=$F$8 Not Binding 28333.33333
$D$9 losses - 20,000.00 $D$9>=$F$9 Binding -
Microsoft Excel 15.0 Sensitivity Report
Worksheet: [Book1]06
Report Created: 22/09/2019 11:11:26 PM

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$5 Land 0 -0.1 1.2 0.1 1E+030
$C$5 Cattle 66666.66667 0 1.3 1E+030 0.1

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$8 inheritance 66666.66667 0 95000 1E+030 28333.33333
$D$9 losses -20000 -4.333333333 -20000 20000 8500
Alexis Harrington

Land Cattle
Maximize 1.20 1.30
86,666.67
- 66,666.67

Constraints
inheritance 1.00 1.00 66,666.67 <= 95,000.00
losses - 0.30 - 0.30 - 20,000.00 >= - 20,000.00

04 if the risk of losing will be increased from 18% to 30%, Alexis


should invest to Cattle only to reach optimum.

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