Multiple Projects And

Constraints

Amit Singla, GEC, Panipat

Topics

Constraints
Method of Ranking
Mathematical Programming Approach
Linear Programming Model
Integer Linear Programming Model
Goal Programming Model

Amit Singla, GEC, Panipat

Constraints
Project Dependence
Capital Rationing
Project indivisibility

Amit Singla, GEC, Panipat

Project Dependence
Kind of economic dependency

Mutually exclusive

Not Mutually exclusive

Positive economic dependency

Amit Singla, GEC, Panipat

Capital Rationing
Capital Rationing exists when funds
available for investment are inadequate to
undertake all projects which are otherwise
acceptable

Amit Singla, GEC, Panipat

Project indivisibility

A capital project has to be accepted or

rejected- it cannot be accepted partially

Amit Singla, GEC, Panipat

 Because of economic dependency, capital

rationing, or project indivisibility, a need
arises for comparing projects in order to
accept some and reject others

Amit Singla, GEC, Panipat

Approaches available
Method Of Ranking
Method Of Mathematical Programming

Amit Singla, GEC, Panipat

Method of Ranking

Two Steps in Method Of Ranking

1.
2.

Problems
1.
2.

Rank all projects

Accept project
Conflict in Ranking
Project indivisibility

Feasible Combinations Approach

Amit Singla, GEC, Panipat

Feasible Combinations Approach

Define all combination of projects
Choose the feasible combination that has
the highest NPV

Amit Singla, GEC, Panipat

Mathematical Programming
Approach

Help in determining the optimal solution

without Explicitly evaluating all Possible
Combinations
2 Broad Categories
1.
2.

Objective Function
Constraint Equations

Amit Singla, GEC, Panipat

Mathematical Programming Model

Linear Programming Model
Integer Linear Programming Model
Goal Programming Model

Amit Singla, GEC, Panipat

Linear Programming Model

Assumptions
1. Objective Function &Constraint Equations are
Linear
2. All the Coefficients in the objective Function
&Constraint Equations are defined with
certainty
3. Objective Function is Unidimensional
4. Decision Variables are Considered to be
continuous
5. Resources are homogeneous
Amit Singla, GEC, Panipat

Integer Linear Programming Model

Use
1. It overcomes the problem of Partial
project because it permits only 0 to 1
2. Capable of handling virtually any Kind of
Project interdependency

Amit Singla, GEC, Panipat

Incorporating Project
interdependency
Mutual Exclusiveness
Contingency
Complementariness

Amit Singla, GEC, Panipat