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Borrowing and Lending in a Mathematical Programming Model of Capital Budgeting
Author(s) -
BHASKAR K. N.
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.tb00863.x
Subject(s) - economics , capital budgeting , rationing , capital (architecture) , mathematical economics , cost of capital , microeconomics , economic growth , profit (economics) , health care , archaeology , project appraisal , history
Weingartner, in 1963, published his solution to the Lorie and Savage problem of choosing the optimal combination of projects given that capital rationing occurs in more than one period. This paper discusses the rationale of the Weingartner model and develops a systematic way of treating lending. Indeed not to include lending can lead to sub‐optimal results. Borrowing is then included into the model at the cost of making certain restrictive assumptions.