Author : Robert Francais Byrne
Publisher :
ISBN 13 :
Total Pages : 279 pages
Book Rating : 4.:/5 (227 download)
Book Synopsis Chance-Constrained Programming and Related Approaches to Risk Control in Capital Budgeting by : Robert Francais Byrne
Download or read book Chance-Constrained Programming and Related Approaches to Risk Control in Capital Budgeting written by Robert Francais Byrne and published by . This book was released on 1968 with total page 279 pages. Available in PDF, EPUB and Kindle. Book excerpt: The report explores a group of approaches to risk control in the capital budgeting process. The specific meaning of risk in the capital investment decision is examined. Models are developed by incorporating risk control measures which are common business practice (particularly the 'payback' method) with some of the recent developments in mathematical programming. Specific models are developed to illustrate methods of dealing with two of the major risk elements in the capital budgeting risks in the sense of insufficient liquidity. In particular, the stochastic nature of the cash flows generated by a project is dealt with by the methodologies of Chance-Constrained Programming and Linear Programming Under Uncertainty (LPUU). A model is developed for the case in which the cash flows are assumed to be normally distributed. A model is also developed where the cash flows are described by arbitrary discrete distributions. The applicability of goemetric programming as a solution method for the discrete model is evaluated. An integer linear programming model is developed by a transformation of the geometric programming model, and its properties and interpretations are investigated. The dual to this model is found to offer significant insights into the problem, with particular reference to the effects of controlling risk elements on a portfolio basis in contrast with the common practice of controlling risks on an individual project basis. (Author).