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Problem 1:
Advertising Campaign Planning:
• Designed to help marketing managers allocate a fixed advertising budget to various advertising
media.
• Objective: Maximize reach, frequency, and quality of exposure.
• Restrictions: Company policy, contract requirements, and media availability.
Advertising Media
No. of Potential
Customers Reached
Cost ($) per
Advertisement
Maximum Times
Available per
Month*
Exposure
Quality Units
1. Daytime TV (1 min), station
WKLA
1,000
1,500
15
65
2. Evening TV (30 sec), station
WKLA
2,000
3,000
10
90
3. Daily newspaper (full page),
The Morning Journal
1,500
400
25
40
4. Sunday newspaper magazine
(half page color), The Sunday
Press
2,500
1,000
4
60
5. Radio, 8:00 a.m. or 5:00 p.m.
news (30 sec), station KNOP
300
100
30
20
•
Objective: Maximizing the total exposure quality units for the overall media selection plan.
•
Problem Formulation:
• Budget: $30,000.
• Restrictions imposed:
• At least 10 television commercials must be used.
• At least 50,000 potential customers must be reached.
• No more than $18,000 may be spent on television advertisements.
• The decision to be made is how many times to use each medium.
Problem 2: (Already Done in Class)
• Eastborne Realty has $2 million available for the purchase of new rental property.
• After an initial screening, Eastborne reduced the investment alternatives to townhouses and
apartment buildings.
• Each townhouse can be purchased for $282,000:
• Five are available.
• Each apartment building can be purchased for $400,000.
• The developer will construct as many buildings as Eastborne wants to purchase.
• Eastborne’s property manager can devote up to 140 hours per month to these new properties:
• Each townhouse is expected to require 4 hours per month.
• Each apartment building is expected to require 40 hours per month.
• Annual cash flow, after deducting mortgage payments and operating expenses, estimated to be:
• $10,000 per townhouse.
• $15,000 per apartment building.
• Objective: Eastborne’s owner would like to determine the number of townhouses and the
number of apartment buildings to purchase to maximize annual cash flow.
Problem 3:
• The Ice-Cold Refrigerator Company is considering investing in several projects that have varying
capital requirements over the next four years.
• Faced with limited capital each year, management would like to select the most profitable
projects that it can afford.
Project Net Present Value, Capital Requirements, and Available Capital for the Ice-Cold Refrigerator
Company
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Explanation & Answer:
Worksheet
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