UTILIZING THE FEASIBLE RANGE AND THE DOMINANT MATRIX TO DETERMINE THE OPTIMUM SOLUTION AND TO MINIMIZE THE COMPUTATIONAL EFFORTS UNDER

• Main Author: Perpustakaan UGM, i-lib
• Format: Article NonPeerReviewed
• Published: [Yogyakarta] : Universitas Gadjah Mada 2002
• Subjects: Jurnal i-lib UGM
• Online Access: https://repository.ugm.ac.id/25428/; http://i-lib.ugm.ac.id/jurnal/download.php?dataId=8422

The true way to cletermine some projects that can maximize the value of a firm under capital rationing is to make all possible combination of the projects. The firm should choose the best combination of projects subject to available budget that can increase the. highest value, i.e. net present value, which is the difference between the discounted cash inflows and cash outflow(s). Although the method is right, a firm that has some projects will deal with hundreds, thousands, or even millions of possible combinations. which can be calculated by 2", where n is the number of projects. Thus, an efficient method should be developed to find some project proposals, which can increase objectively the value of a firm. The method utilizes the feasible range and the dominant matrix to determine the optimum solution and to minimize the computational efforts under capital rationing In this study, eight cases are tested using a presented algorithm. The results show that the method used in this study saves much time in dealing with the data set. It means that the method is efficient to minimize the computational efforts. On the other hand, after comparing with two other methods commonly used, i.e. profitability index and net present value, all of optimum solution set of eight cases tested by the algorithm show that the method always-displays a consistent result: thefirst rank and the highest net present value. Keywords: capital rationing