DD&T, Inc Is Considering the Development of Three New Environmentally Friendly

Essay

DD&T, Inc. is considering the development of three new environmentally friendly products. One product will be selected from each of the high- end products and the commercial products lines. The company will set aside $2.5 million for this development. If the company's MARR is 8% per year, and all products have the same useful life of 7 years with zero salvage value, formulate the capital allocation problem as a linear programming model. $$\begin{array} { | l | l | c | c | } \hline \text { roduct Line } & \text { Product } & \text { levelopment Cost, \$ } & \begin{array} { l } \text { Estimated Net } \\\text { Annual Revenue, } \$\end{array} \\\hline \text { ommercial } & X 1 & 70,000 & 510,0 \\& && 00 \\\hline & X 2 & 20,000 & 710,0 \\& && 00 \\\hline & X 3 & 45,000 & 810,0 \\& & &00 \\\hline \text { igh - End } & Y 1 & 80,000 & 760,0 \\& & & 00 \\\hline & Y 2 & 30,000 & 860,0 \\& & & 00 \\\hline & Y 3 & 55,000 & 910,0 \\& && 00 \\\hline\end{array}$$ $$\begin{array} { | c | c | c | c | } \hline \text { Product Line } & \text { Product } & \text { Development Cost, \$ } & \begin{array} { c } \text { Estimated Net } \\\text { Annual Revenue, } \$\end{array} \\\hline \text { Commercial } & X 1 & 270,000 & 510,000 \\\hline & X 2 & 420,000 & 710,000 \\\hline & X 3 & 445,000 & 810,000 \\\hline \text { High- End } & Y 1 & 480,000 & 760,000 \\\hline & Y 2 & 730,000 & 860,000 \\\hline & Y 3 & 755,000 & 910,000 \\\hline\end{array}$$ $\begin{array}{|c|c|c|c|}\hline \text { Product Line } & \text { Product } & \text { Development Cost, \$} & \begin{array}{c}\text { Estimated Net } \\\text { AnnualRevenue, } \$\end{array} \\\hline \text { Commercial } & \mathrm{X} 1 & 270,000 & 510,000 \\\hline & \mathrm{X}_{2} & 420,000 & 710,000 \\\hline & \mathrm{X}_{3} & 445,000 & 810,000 \\\hline \text { High- End } & \mathrm{Y1} & 480,000 & 760,000 \\\hline & \mathrm{Y2} & 730,000 & 860,000 \\\hline & \mathrm{Y3} & 755,000 & 910,000 \\\hline\end{array}$