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Programming Solutions to Capital Rationing Problems
Author(s) -
HUGHES JOHN S.,
LEWELLEN WILBUR G.
Publication year - 1974
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1974.tb00850.x
Subject(s) - rationing , constraint (computer aided design) , capital expenditure , economics , capital (architecture) , value (mathematics) , index (typography) , capital budgeting , microeconomics , computer science , actuarial science , finance , mathematics , economic growth , health care , geometry , archaeology , machine learning , project appraisal , world wide web , history
Mathematical programming approaches to the choice of capital expenditure projects under conditions of funds constraint have been widely advocated in the literature of finance. The present paper takes exception to such suggestions, and concludes that programming is not only excessively costly and complex for most practical applications, but is frequently incorrect in the decisions it implies. A technique for allocating funds via an adjusted Excess Present Value Index is developed and proposed as a superior analytical framework.