An investor has identified two companies to invest in. Company 1 is an extractive company, and Company 2 is a tech company. Company 1 is currently trading for $40 per share, and Company 2 is currently trading for $25 per share. If the investment is undertaking, the investor estimates that the price of Company 1 will go to $55 per share and Company 2 will go to $43 per share. The investor has identified Company 2 as the higher risk alternative. The investor is willing to invest a maximum of $50,000 in the two companies from which it would want to invest at least $15,000 in Company 1 and at least $10,000 in Company 2. Because of the higher risk associated with Company 2, the investor has recommended that at most $25,000 should be invested in Company 2.
a.Formulate a linear programming model that can be used to determine the number of shares of Company 1 and the number of shares of Company 2 that will meet the investment constraints and maximize the total return for the investment. (12 Marks)
b.Graph the feasible region. (13 Marks)
c.Determine the coordinates of each extreme point. (4 marks)
d.Find the optimal solution. (6 Marks)
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