Capital Rationing Model
Most organizations are in the business of making money. This
can be done through providing services and products or through investments.
However, how an organization determines which investments are the right ones is
very important. One method of doing this is capital budgeting. According to
Costa in his article, “An approximate solution approach for a
scenario-based capital budgeting model,” capital budgeting or investment
appraisal is concerned with the selection of a portfolio of projects for
investment under budget constraints and aiming to a maximal return value.
Please read the article by Costa and respond to the following questions.
http://www.academia.edu/415007/Capital_Rationing_Problems_under_Uncertainty_A_Probabilistically_Constrained_Approach._Accepted_to_Computational_Optimization_and_Applications
Discuss the concept of capital budgeting? What is it? What
are the advantages and disadvantages of capital budgeting? What does the author
say about DCF and IRR? What model does he suggest instead? Briefly discuss the
heuristic procedure for ?nding feasible solutions for a dynamic capital budget
model (M1). Briefly discuss the model (M1) and the technical dif?culties for
solving it.
Lastly, discuss the new model (M2) proposed by the authors.
Why is this the better model? How do you see it being used in health care?
