Proceedings of the 9th International Conference on Modern Research in Management, Economics and Accounting
Year: 2018| Page No:152-169
A dynamic programming model for solving a capital rationing problem in capital budgeting1: An applied study on Ras Lanuf oil & gas processing company
Ali Alsharif , Collins Ntim
This study aims to determine the extent to which the dynamic programming can be used in the preparation of capital budgeting to rationalize investment decisions under limited resources. Ras Lanuf Oil & gas processing company is chosen as a case study, due to the importance of the company’s investment activity and its impact on the future of the company’s business. The importance of this paper is that it illustrates how to link the managerial accounting tools and mathematical models to create a new synthesis that can be used in planning and control of investment expenditures. This paper presents a mathematical model that contributes to raising the efficiency of the capital expenditure decisions implemented by Ras Lanuf Company. A Dynamic programming (DP) is one of the important mathematical models which is suggested in order to select the optimal investment alternatives under the available funds. The DP is suitable for problems that require sequential decisions or that can be divided into a number of sub-problems (called stages). The results obtained from the application of the proposed mathematical model in the applied study on investment projects contribute to the determination of the optimal plan for implementing the investment projects in Ras Lanuf Company, leading to achieving the highest possible return within the available budget for investment.
Keywords: Dynamic Programming; Capital Budgeting; Optimal Investment Plan.