Use linear programming to find the minimum cash settlement


As part of the settlement for a class action lawsuit, Hoxworth corporation must provide sufficient cash to make the following annual payments (thousands of dollars): Year 1 2 3 4 5 6 Payment 190 215 240 285 315 460 The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (4% annually) and government securities, at prices and rates currently quoted in The Wall Street Journal. Hoxworth wants to develop a plan for making the annual payments by investing in the following securites (par value = $1000). Funds not invested in these securities will be placed in savings. Security Current Price Rate (%) Years to Maturity 1 $1055 6.750 3 2 $1000 5.125 4 Assume that interest is paid annually. The plan will be submitted to the judge, and if approved, Hoxworth will be required to pay a trustee the amount that will be required to fund the plan. a. Use linear programming to find the minimum cash settlement necessary to fund the annual payments. d. Suppose that the annual payments are to be made at the end of each year. Reformulate the model to accommodate this change. How much would Hoxworth save if this change could be negotiated? SHOW EXCEL SCREENSHOTS AND SOLVER STEPS.

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Operation Management: Use linear programming to find the minimum cash settlement
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