(MORNING PROGRAMME) BACHELOR OF SCIENCE IN COMPUTER SCIENCE (THIRD YEAR) SEMESTER – FIRST SEMESTER 2019 COURSE BSCS-507 – OPERATIONS RESEARCH – I HANDOUT I – SAMPLE PROBLEMS SET I
FOLLOWING ARE SOME SELECTED SAMPLE PROBLEMS OF LINEAR
PROGRAMMING (OPERATIONS RESEARCH). THESE ARE SENT TO YOU TO GIVE YOU AN IDEA ABOUT WHAT TYPE OF REAL-LIFE PRACTICAL BUSINESS- ORIENTED PROBLEMS CAN BE SOLVED USING THE DOMAIN KNOWN AS OPERATIONS RESEARCH. PLEASE GO THROUGH THEM! (REMEMBER: YOU MIGHT NOT BE ABLE TO SOLVE THEM YET – THEY ARE ONLY SENT TO YOU AS THE SAMPLE PROBLEMS!)
CAPITAL BUDGETING MODEL PROBLEM
An NGO is considering five different investment opportunities. The cash outflows during the current year and the following year, and the net present values (NPV) (all in million of Rupees) for the five investments are as follows: (11, 3, 13); (53, 6, 16); (5, 5, 16); (5, 1, 14) and (29, 34, 39). The NGO has Rs. 40 million available for investment at the present time (time 0) and estimates that one year from now (time 1) Rs. 20 million will be available for investment. The NGO may purchase any fraction of each investment. In this case, the cash outflows and NPV are adjusted accordingly. For example, if the NGO purchases one-fifth of investment 3, then a cash outflow of (1/5)*(Rs. 5 million) = Rs. 1 million would be required at time 0, and a cash outflow of (1/5)*(Rs. 5 million) = Rs. 1 million would be required at time 1. The one-fifth share of investment would yield an NPV of (1/5)*(Rs. 16 million) = Rs. 3.2 million. The management of the NGO wishes to maximise the NPV that can be obtained by investing in investments 1 to 5. Formulate an LP that will help achieve this goal. Assume that any funds left over at time 0 can not be used at time 1.
SHORT-TERM FINANCIAL PLANNING MODEL PROBLEM
An electronics company manufactures LCDs and LEDs. The per-unit labour costs, raw material costs, and the selling price of each product, respectively, (in thousand Rupees) are as follows: (50, 30, 100) and (35, 40, 90). On February 1, 2017, the company has available raw material that is sufficient to manufacture 100 LCDs and 100 LEDs. On the same date, the company’s balance sheet shows that the company’s cash assets are Rs. 10,000,000; accounts receivable assets (money owed to the company by customers who have previously purchased the products) are Rs. 3,000,000; inventory outstanding assets (value of February 1, 2017, inventory) are Rs. 7,000,000 and bank loan liabilities are Rs. 10,000,000. The company’s asset/liability ratio (called the current ratio) is 20,000,000 / 10,000,000 = 2. The company must determine how many LCDs and LEDs should be produced during February. Demand is large enough to ensure that all goods produced will be sold. All sales are on credit, however, and payment for goods produced in February will not be received until April 1, 2017. During February, the company will collect Rs. 2,000,000 in accounts receivable, and the company must pay off Rs. 1,000,000 of the outstanding loan and a monthly rent of Rs. 1,000,000. On March 1, 2017, the company will receive a shipment of raw material worth Rs. 2,000,000, which will be paid for on April 1, 2017. The company’s management has decided that the cash balance on March 1, 2017 must be at least Rs. 4,000,000. Also, the company’s bank requires that the current ratio at the beginning of March be at least 2. In order to maximise the contribution to profit from February production (i.e. (revenues to be received) minus (variable production costs)), what should the company produce during February?