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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