UNIVERSITY OF KARACHI

DEPARTMENT OF COMPUTER SCIENCE

(MORNING PROGRAMME)
MASTERS IN COMPUTER SCIENCE (PREVIOUS)
SEMESTER – FIRST SEMESTER 2019
COURSE CS-507 – LINEAR PROGRAMMING
HANDOUT I – SAMPLE PROBLEMS SET I

FOLLOWING ARE SOME SELECTED SAMPLE PROBLEMS OF LINEAR

PROGRAMMING (OPERATIONS RESEARCH). THESE ARE SENT TO YOU TO GIVE
YOU AN IDEA ABOUT WHAT TYPE OF REAL-LIFE PRACTICAL BUSINESS-
ORIENTED PROBLEMS CAN BE SOLVED USING THE DOMAIN KNOWN AS
OPERATIONS RESEARCH. PLEASE GO THROUGH THEM!
(REMEMBER: YOU MIGHT NOT BE ABLE TO SOLVE THEM YET –
THEY ARE ONLY SENT TO YOU AS THE SAMPLE PROBLEMS!)

CAPITAL BUDGETING MODEL PROBLEM

An NGO is considering five different investment opportunities. The cash outflows during the
current year and the following year, and the net present values (NPV) (all in million of Rupees)
for the five investments are as follows: (11, 3, 13); (53, 6, 16); (5, 5, 16); (5, 1, 14) and (29, 34, 39).
The NGO has Rs. 40 million available for investment at the present time (time 0) and estimates
that one year from now (time 1) Rs. 20 million will be available for investment. The NGO may
purchase any fraction of each investment. In this case, the cash outflows and NPV are adjusted
accordingly. For example, if the NGO purchases one-fifth of investment 3, then a cash outflow
of (1/5)*(Rs. 5 million) = Rs. 1 million would be required at time 0, and a cash outflow of
(1/5)*(Rs. 5 million) = Rs. 1 million would be required at time 1. The one-fifth share of
investment would yield an NPV of (1/5)*(Rs. 16 million) = Rs. 3.2 million. The management of
the NGO wishes to maximise the NPV that can be obtained by investing in investments 1 to 5.
Formulate an LP that will help achieve this goal. Assume that any funds left over at time 0 can
not be used at time 1.

SHORT-TERM FINANCIAL PLANNING MODEL PROBLEM

An electronics company manufactures LCDs and LEDs. The per-unit labour costs, raw
material costs, and the selling price of each product, respectively, (in thousand Rupees) are as
follows: (50, 30, 100) and (35, 40, 90). On February 1, 2017, the company has available raw
material that is sufficient to manufacture 100 LCDs and 100 LEDs. On the same date, the
company’s balance sheet shows that the company’s cash assets are Rs. 10,000,000; accounts
receivable assets (money owed to the company by customers who have previously purchased the
products) are Rs. 3,000,000; inventory outstanding assets (value of February 1, 2017, inventory)
are Rs. 7,000,000 and bank loan liabilities are Rs. 10,000,000. The company’s asset/liability
ratio (called the current ratio) is 20,000,000 / 10,000,000 = 2. The company must determine how
many LCDs and LEDs should be produced during February. Demand is large enough to ensure
that all goods produced will be sold. All sales are on credit, however, and payment for goods
produced in February will not be received until April 1, 2017. During February, the company
will collect Rs. 2,000,000 in accounts receivable, and the company must pay off Rs. 1,000,000 of
the outstanding loan and a monthly rent of Rs. 1,000,000. On March 1, 2017, the company will
receive a shipment of raw material worth Rs. 2,000,000, which will be paid for on April 1, 2017.
The company’s management has decided that the cash balance on March 1, 2017 must be at
least Rs. 4,000,000. Also, the company’s bank requires that the current ratio at the beginning of
March be at least 2. In order to maximise the contribution to profit from February production
(i.e. (revenues to be received) minus (variable production costs)), what should the company
produce during February?

WISH YOU THE BEST OF LUCK

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