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Abstract
The capital budgeting problem for a firm deals with the allocation of limited amounts of capital among a specified set of investment opportunities. In this article, we assume the investment opportunities are indivisible in nature and that the firm desires to make this allocation in such a way as to maximize the discounted sum of dividends paid to its shareholders. From a mathematical programming standpoint, the problem may be classified as a mixed zero-one integer programming problem. Special solution techniques based on Benders's partitioning procedure and Balas's zero-one algorithm are developed for this problem. The solution algorithm may be extended to general mixed-integer programming problems.
