A goal-seeking approach to capital budgeting |
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Authors: | Yupo Chan [Author Vitae] Joseph P. DiSalvo [Author Vitae] [Author Vitae] |
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Affiliation: | a Department of Systems Engineering, University of Arkansas, 2801 South University, Little Rock, AR 72204-1099, USAb 2828 Scarborough Drive, Richmond, VA 23235, USAc Veridian Engineering, 5200 Springfield Pike, Dayton, OH 45431-1255, USA |
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Abstract: | This paper articulates how a goal-seeking model addresses a variation of the capital-budgeting problem. Focused toward technology modernization in the public sector, this multi-criteria optimization model explicitly considers the diverse functions of the organization. In particular, the synergism amongst the functions is modeled as a multiplicative value function. The model is solved by the “constraint reduced feasible-region method”, resulting in a non-convex mathematical program that produces numerical intricacies. Linearization of the criterion (objective) functions reduces such intricacy. An Army-modernization acquisition-study was used to illustrate the proposed model, showing that its non-inferior solutions are remarkably stable. Comparison is also made with other approaches, typically formulated as goal-setting programs. The model highlights how technology acquisitions are affected as the priorities of each organizational function changes. |
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Keywords: | Project selection Multicriteria optimization Value functions Technology modernization |
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