J. R. Carrington has $4 million to invest in 3 oil well sites.

The revenue earned

from each site depends on the amount invested in the individual site. See the table
below for the investment/revenue matrix.
Amount Invested
($ millions)
0
1
2
3
4

Revenue ($ millions)
Site 1
Site 2
Site 3
4
3
3
7
6
7
8
10
8
9
12
13
11
14
15

Assume that the amount invested must be an exact multiple of $ 1 million, and
determine by dynamic programming to determine the investment policy that will
maximize the revenue J. R. will earn from the three wells.
Solution:
Stage 1:

Site10
Site11
Site12
Site13
Site14

S=x1
4
7
8
9
11

F1(s1)
4
7
8
9
11

x1(s1)
Site10
Site11
Site12
Site13
Site14

x1*
Site10
Site11
Site12
Site13
Site14

Stage 2:

Site1

S=x2
Site11

Site12

Site13

Site14

F1(s1)

7
10
13
17
19
21

8
11
14
18
20
22

9
12
15
19
21
23

11
14
17
21
23
25

14
17
21
23
25

Site20
Site21
Site22
Site23
Site24

3
6
10
12
14

4
7
10
14
16
18

x1(s1)

x1*

Stage 3:

Site2

S=x2
Site21

Site22

Site23

Site24

F2(s2)

6
13
15
19
21
13

10
17
19
23
25
17

12
19
21
25
27
19

14
21
23
27
29
21

21
23
27
29
21

Site30
Site31
Site32
Site33
Site34

3
7
9
13
15

3
10
12
16
18
10

Invest 3 million in Site 3 and 1 million in Site 1

x2(s2)

x2*