can afford to meet all the minimums, hes really confused about the best way to spend the
remaining funds. So again Tom asks himself, ”How am I going to spend this money?”
a.
Create a mathematical model for this problem and solve it. What is the optimal
solution?
b.
Of the constraints Tom placed on this problem, which are ”binding” or preventing
the objective function from being improved further?
c.
Suppose Tom was willing to increase the allowable number of evening TV ads. How
much would this improve the solution?
d.
Suppose Tom was willing to double the allowable number of radio ads aired each
day. How much would this improve the solution?
2 Foreign Exchange Trading
Baldwin Enterprises is a large manufacturing company with operations and sales divisions
located in the United States and several other countries. The CFO of the organization, Wes
Hamrick, is concerned about the amount of money Baldwin has been paying in transaction
costs in the foreign exchange markets and has asked you to help optimize Baldwins foreign
exchange treasury functions.
With operations in several countries, Baldwin maintains cash assets in several differ-
ent currencies: U.S. dollars (USD), the European Unions euro (EUR), Great Britains pound
(GBP), Hong Kong dollars (HKD), and Japanese yen (JPY). To meet the different cash flow
requirements associated with its operations around the world, Baldwin often must move
funds from one location (and currency) to another. For instance, to pay an unexpected
maintenance expense at its facility in Japan, Baldwin might need to convert some of its
holdings in U.S. dollars to Japanese yen.
The foreign exchange (FX) market is a network of financial institutions and brokers
in which individuals, businesses, banks, and governments buy and sell the currencies
of different countries. They do so to finance international trade, invest or do business