As part of the settlement for a class action lawsuit, HoxworthCorporation must provide sufficient cash to make the followingannual payments (in thousands of dollars):
The annual payments must be made at the beginning of each year.The judge will approve an amount that, along with earnings on itsinvestment, will cover the annual payments. Investment of the fundswill be limited to savings (at 3.5% annually) and governmentsecurities, at prices and rates currently quoted in The Wall StreetJournal.
Hoxworth wants to develop a plan for making the annual paymentsby investing in the following securities (par value = $1000). Fundsnot invested in these securities will be placed in savings.
Assume that interest is paid annually. The plan will besubmitted to the judge and, if approved, Hoxworth will be requiredto pay a trustee the amount that will be required to fund theplan.
- Problem 4 07 Algorithmic As Part Of The Settlement For A Class Action Lawsuit Hoxworth Corporation Must Provide Suffi 1 (38.45 KiB) Viewed 16 times
a. Use linear programming to find the minimum cash settlement necessary to fund the annual payments. Let F = total funds required to meet the six years of payments G₁ units of government security 1 G2 = units of government security 2 Si investment in savings at the beginning of year i Note: All decision variables are expressed in thousands of dollars. If required, round your answers to four decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) Min s.t. F G1 + G1 + G1 + G1 + G2 + G2 + G2+ G2 + G2 + S1 + S2 + S3 + S4 + S5 + S1 = S2 = S3 = S4= S5 = S6 =
Round your answer to the nearest dollar. Current investment required Investment in government security 1$ Investment in government security 2 $ $ $ $ $ Investment in savings for year 1 Investment in savings for year 2 Investment in savings for year 3 Investment in savings for year 4 Investment in savings for year 5 Investment in savings for year 6 $ $ $ $ b. Use the shadow price to determine how much more Hoxworth should be willing to pay now to reduce the payment at the beginning of year 6 to $400,000. Round your answer to the nearest dollar. c. Use the shadow price to determine how much more Hoxworth should be willing to pay to reduce the year 1 payment to $150,000. Round your answer to the nearest dollar. Hoxworth should be willing to pay anything less than $
d. Suppose that the annual payments are to be made at the end of each year. Reformulate the model to accommodate this change. Note: All decision variables are expressed in thousands of dollars. If required, round your answers to four decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) Min s.t. 1) 2) 3) 4) 5) 6) 7) + $ G1+ G1 + G1 + G1 + G2 + G2 + G2 + G2 + G2+ S1 + S2 + S3 + S4 + S5 + S6 + S1 S2 = S3 = S4= S5 = S6= S7 = How much would Hoxworth save if this change could be negotiated? Round your answer to the nearest dollar.