Maximize the total returns for the investments

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A financial advisor at Baroda Investments identified two companies that are likely candidates for a takeover in the near future. Eastern cable is a leading manufacturer of flexible cable systems used in the construction industry, and comswitch is the new firm specializing in digital switching systems. Eastern cable is currently trading for $40 per share, and comswitch is currently trading for $25 per share. If the takeovers occur, the financial advisor estimates that the price of eastern cable will go to $55 per share and comswitch will go to $43 per share. At this point in time, the financial advisor has identified comswitch as the higher risk alternative. Assume that a client indicated a willingness to invest a maximum of 50000 in two companies. The clients wants to invest at least $15000 in eastern cable and atleast $10000 in comswitch. Because of the higher risk associated with comswitch, the financial advisor has recommended that at most $25000 should be invested in comswitch. Formulate a linear programming model that can be used to determine the number of shares of eastern cable and the number of shares of comswitch that will meet the investment constraints and maximize the total returns for the investments.

Reference no: EM132835080

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