Question

Consider a small Oil production firm with 5 competing oil production projects, A - E. The...

Consider a small Oil production firm with 5 competing oil production projects, A - E.

The table below shows the estimated long-term profit (Net Present Value) for each project as well as the amount of investment capital required to start the project.

You have been contacted to help select the best combination of projects to maximize the Net Present Value subject to the capital investment limit of $32 million.

Production Project

A

B

C

D

E

Estimated Profit (millions)

25

20

19

28

21

Capital Required (millions)

11

8

14

19

13

1) Formulate a Binary Integer Programming (BIP) model on a spreadsheet.

2) Solver the model using Solver.

Homework Answers

Answer #1

Below is the screenshot of the LP table -

Below is the screenshot of the formula applied -

Below is the screenshot of the LP solver -

Below is the screenshot of the result obtained -

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