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Integer Programming, Linear Programming and Capital Budgeting.

This article reviews the formulation of the constrained capital budgeting problem. The article compares the merits of integer programming and continuous linear programming as methods of solving this problem. The paper discusses capital constraints and the question of an appropriate objective functio...

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Published in:Abacus Vol. 9; no. 2; pp. 180 - 193
Main Author: Finn, Frank J.
Format: Article
Published: Wiley-Blackwell Dec73
Subjects:
Capital budget
Integer programming
Linear programming
Probability theory
Mathematical programming
Accounting
Online Access:View this record in EBSCOhost
Summary:This article reviews the formulation of the constrained capital budgeting problem. The article compares the merits of integer programming and continuous linear programming as methods of solving this problem. The paper discusses capital constraints and the question of an appropriate objective function. Additional constraints are presented and problems arising because of the binary nature of capital projects are discussed. Some attempts have been made to include probability considerations in mathematical programming approaches to capital budgeting.