Energy Management Corporation (EMC) must decide its level ofcapital investment in the six energy ventures described below. EMCwishes to maximize its total expected return on a maximum totalinvestment of $10,000,000. At least half of this must be in theUnited States, including Alaska. No more than 20% can be in sourcrude and coal investments. In addition, allocations must at leastmeet 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 |
1. Formulate the linear programming model. Clearly state yourdecision variables, objective function and all constraints. Usefractions rather than percentages in your formulation of theobjective function.
2. Solve the model using Microsoft Excel Solver. Attach theMicrosoft Excel file as part of your submission.
3. Interpret the results from Microsoft Excel Solver, includingthe Sensitivity Report. What aspects of the computer-generatedstrategy are you in agreement with (based on a consideration of thesensitivity data)? What aspects of it would you disagree with?Why?
