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An Optimization Model for Corporate Financial Planning

Author

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  • William F. Hamilton

    (University of Pennsylvania, Philadelphia, Pennsylvania)

  • Michael A. Moses

    (University of Pennsylvania, Philadelphia, Pennsylvania)

Abstract

This paper describes the development and actual implementation of an optimization model for strategic planning in a large diversified organization. In contrast to previous discussions of the applicability of financial theory and mathematical programming methods in corporate planning, emphasis is placed on providing useful decision information within the practical limitations of theory, available computational capabilities, and established planning practices. The corporate model reflects the full range of financial decisions, including internal capital budgeting, acquisitions, divestments, debt creation/repayment, stock issue/repurchase, and dividend payout. Operating as an integral part of the corporate planning process, the mixed integer programming model selects optimal investment and financing programs over a multiperiod planning horizon. An on-line computational system permits extensive parametric analysis. The major features of the model, the supporting computational system, and implementation experience are presented.

Suggested Citation

  • William F. Hamilton & Michael A. Moses, 1973. "An Optimization Model for Corporate Financial Planning," Operations Research, INFORMS, vol. 21(3), pages 677-692, June.
    • Handle: RePEc:inm:oropre:v:21:y:1973:i:3:p:677-692
    DOI: 10.1287/opre.21.3.677
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    Cited by:

    1. J. M. Blin, 1977. "Development of a Corporate Information System," Discussion Papers 304, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Veterina Nosadila Riaventin & Sofyan Dwi Cahyo & Ivan Kristianto Singgih, 2021. "A Model for Developing Existing Ports Considering Economic Impact and Network Connectivity," Sustainability, MDPI, vol. 13(7), pages 1-17, March.
    3. Edward A. Stohr & Mohan Tanniru, 1978. "The Design of a Corporate Planning System Simulator," Discussion Papers 342, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Rayenda Khresna Brahmana & Ritzky Karina Brahmana, 2016. "The Financial Planning and Financial Literacy of ex-Malaysia Indonesian Migrant Workers," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2016(5), pages 47-59.
    5. Joan S. Steinberg & Larry R. Arnold, 1981. "An Interactive Approach For Optimizing Debt Repayment Schedules," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 4(2), pages 137-146, June.

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