Multiple Projects and Constraints
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Transcript of Multiple Projects and Constraints
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Multiple Projects And
Constraints
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Topics
Constraints
Method of Ranking
Mathematical Programming Approach Linear Programming Model
Integer Linear Programming Model
Goal Programming Model
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Constraints
Project Dependence
Capital Rationing
Project indivisibility
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Project Dependence
Kind of economic dependency
Mutually exclusive
Not Mutually exclusive Positive economic dependency
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Capital Rationing
Capital Rationing exists when funds
available for investment are inadequate toundertake all projects which are otherwise
acceptable
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Project indivisibility
A capital project has to be accepted or rejected- it cannot be accepted partially
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Approaches available
Method Of Ranking
Method Of Mathematical Programming
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Method Of Ranking
2 Steps in Method Of Ranking
1. Rank all projects
2. Accept project Problems
1. Conflict in Ranking
2. Project indivisibility Feasible Combinations Approach
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Feasible Combinations Approach
Define all combination of projects
Choose the feasible combination that has
the highest NPV
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Mathematical Programming
Approach Help in determining the optimal solution
without Explicitly evaluating all Possible
Combinations
2 Broad Categories
1. Objective Function
2. Constraint Equations
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Mathematical Programming Model
Linear Programming Model
Integer Linear Programming Model
Goal Programming Model
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Linear Programming Model
Assumptions
1. Objective Function &Constraint Equations areLinear
2. All the Coefficients in the objective Function&Constraint Equations are defined withcertainty
3. Objective Function is Unidimensional
4. Decision Variables are Considered to becontinuous
5. Resources are homogeneous
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Integer Linear Programming Model
Use
1. It overcomes the problem of Partial
project because it permits only 0 to 12. Capable of handling virtually any Kind of
Project interdependency
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Incorporating Project
interdependency Mutual Exclusiveness
Contingency
Complementariness