| Abstract: | The role of the tax system in generating interactions between the post‐tax cash flows of different projects is discussed. When such interactions can occur, the capital budgeting process should be based around project combinations rather than individual projects. Evaluation of a project combination in net present value terms can easily be done using a spreadsheet. If the number of individual projects is large, then project combinations can be generated and an optimum combination of projects searched for using a genetic algorithm. The genetic algorithm approach has an advantage over alternative computational approaches, such as mixed integer programming, because of the more understandable representation of the problem it allows. Copyright © 2007 John Wiley & Sons, Ltd. |
