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A Note on the Application of Linear Programming to Capital Budgeting

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  • Lusztig, Peter
  • Schwab, Bernhard

Abstract

The application of linear programming techniques to the problem of capital budgeting has repeatedly been proposed in the literature. However, while the potential of linear programming models for this important area of business decisions is generally recognized, practical applications still face some severe limitations. This note focuses on one particular problem peculiar to the application of programming techniques to capital budgeting, namely the mutual dependence between the optimal solution of the linear programming model and the discount rate used to calculate the coefficients of its objective function.

Suggested Citation

  • Lusztig, Peter & Schwab, Bernhard, 1968. "A Note on the Application of Linear Programming to Capital Budgeting," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 3(4), pages 427-431, December.
    • Handle: RePEc:cup:jfinqa:v:3:y:1968:i:04:p:427-431_01
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    Cited by:

    1. Marc Bertonèche & Herwig Langohr, 1977. "Le choix des investissements en situation de rationnement du capital : comparaison des solutions fournies par différents modèles théoriques," Revue Économique, Programme National Persée, vol. 28(5), pages 730-764.
    2. Bogdan Rębiasz, 2009. "A method for selecting an effective investment project portfolio," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 19(3), pages 95-117.

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