A. Set up the linear programming problem that a benefits officer might use to determine the total-return maximizing allocation of the employee s pension portfolio. Use the inequality forms of the constraint conditions. B. Solve this linear programming problem and interpret all solution values. Also determine the employee s expected before-tax and after-tax income levels. C. Calculate the amount of unrealized capital gain earned per year on this investment portfolio. D. What is the total return opportunity cost of the $6,000 after-tax income constraint? Several companies have learned that a well-funded and comprehensive employee benefits package constitutes an important part of the compensation plan needed to attract and retain key personnel. An employee stock ownership plan, profit-sharing arrangements, and deferred compensation to fund employee retirement are all used to allow productive employees to share in the firm s growth and development. Among the fringe benefits offered under the cafeteria-style benefits plans is comprehensive medical and dental care furnished through local health maintenance organizations, on-site daycare centers for employee children, and “eldercare” support for the aging parents and other dependents of workers. Many companies also provide their employees with so-called “defined benefit” pension plans. Under defined benefit plans, employers usually offer workers a fixed percentage of their final salary as a retirement annuity. In a typica
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