1- Consider the SEQUEL financial group problem in your chapter 2 homework. Use t
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1- Consider the SEQUEL financial group problem in your chapter 2 homework. Use the following sensitivity report for this LP model to answer the following questions. (Please write any required calculation to get the full credit)
What is the impact on the least amount SEQUEL can invest under the following scenarios? a. Dividend should be at least $210 per year. b. The criteria on the short-term growth is eliminated.
Variable Cells Final Value 1695.332 Reduced Obiective AllowableAllowable Cost Coefficient Increase Decrease Cell SBS3 S invested Apple SCS3 S invested Microsoft SDS3 S invested FactSet Name 0.082 1E+30 0.286 0.106 0.076 0.106 1646.192 Constraints Final Value $1,066.83 $5,500.00 Shadow Constraint Allowable Allowable R.H. Side Increase Decrease Cell SES6 Short term growth SES7 Intermediate growth SES8 Dividend income Name Price 0.491 3.194 850 5500 200 216.830 1340 43.671 1E+30 985.714 39.181 $200.00Explanation / Answer
(a)
Note that the Dividend constraint has a shadow price of 3.194 and this is valid up to an allowable increase of 43.671. So, for each unit change in the RH side, from $200 to $243.671, there will be a 3.194 change in the objective function.
So, in this case, since the proposed increase is $10 only (less than the allowable increase), the change in SEQUEL value (which is the objective) will be 10 x 3.194 i.e. 31.94.
(b)
The short-term growth criteria is a non-binding constraint (shadow price is zero). So, there will be no change in the SEQUEL value even if the constraint is removed. Basically, the constraint does not have any impact on the optimal solution.
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