ESTATE LIQUIDATION
A modestly wealthy individual has left an estate to his son. The value of some assets are estimated to increase over time while others are estimated to decrease. Estimates of the values (in $1000) of the assets contained based on the year they are liquidated are shown in Table 1.
Table 1. Estimated liquidation values of assets based on year of liquidation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
- Home $275 $290 $310 $330 $350 $370 $385
- Jewelry $36 $38 $40 $42 $44 $46 $48
- Mercedes $80 $75 $70 $65 $60 $55 $50
- Rare Gold Coins $115 $118 $121 $123 $124 $125 $126
- Stocks $425 $450 $470 $490 $505 $520 $530
- Bonds $85 $86 $87 $88 $89 $90 $92
The son's financial advisor has been tasked to develop a schedule for liquidating the assets.
The son's three requirements are
1. Each asset class (e.g., Home, Jewelry, etc.) must be liquidated in a single year, i.e., no partial liquidations.
2. Schedule the liquidation in a manner that provides at least $125,000 each year, cumulatively. That is, liquidate at least $125,000 in the first year, a total of at least $250,000 in the first two years, a total of at least $375,000 in the first three years and so on.
3. Maximize the total liquidated over the seven years. Create a Solver-based spreadsheet model to determine when to liquidate each of the six asset classes and solve the model.