For example, if we make investment Six and Seven, without making investment Five, the fourth constraint is violated.ģ. For example, if we make investment One and Two, the second constraint is violated.Ģ. With this formulation, it becomes easy to analyze any trial solution.ġ. Total Profit equals the sumproduct of Profit and YesNo. Insert the following five SUMPRODUCT functions.Įxplanation: cell K7 (the amount of capital used) equals the sumproduct of the range C7:I7 and YesNo, cell K8 equals the sumproduct of the range C8:I8 and YesNo, etc. To make the model easier to understand, create the following named ranges. What is the overall measure of performance for these decisions? The overall measure of performance is the total profit of the capital investments made, so the objective is to maximize this quantity.Ģ. Fourth, investment Six and investment Seven can only be made if investment Five is made.Ĭ. Third, only investment Three or investment Four can be made. Second, only investment One or investment Two can be made. For example, investment One uses 12 units of capital. What are the constraints on these decisions? First, the amount of capital used by the investments cannot exceed the limited amount of capital available (50). What are the decisions to be made? For this problem, we need Excel to find out which capital investments to make (Yes=1, No=0).ī. To formulate this binary integer programming (BIP) model, answer the following three questions.Ī.
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