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Capital budgeting and lagrangian relaxation: A case study

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  • Armstrong, R. D.
  • Cook, W. D.
  • Kung, D. S.

Abstract

This paper presents a new approach to the classical multiyear capital budgeting problem. Three basic operational principles, arising out of an actual implementation of such a model, are specifically addressed in this approach. These principles are: (1) all budgets except that of the first year possess a degree of flexibility; (2) the user favours a series of near optimal solutions to a single optimal solution; and (3) an effective low cost procedure for dealing with large problems is required. Using the particular example of capital budgeting in the area of highway maintenance, an algorithm is developed and computational results for a variety of problem sizes are presented.

Suggested Citation

  • Armstrong, R. D. & Cook, W. D. & Kung, D. S., 1982. "Capital budgeting and lagrangian relaxation: A case study," Omega, Elsevier, vol. 10(3), pages 321-327.
    • Handle: RePEc:eee:jomega:v:10:y:1982:i:3:p:321-327
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