Application of a micro computer in investment decisions using dynamic programming

Abstract

Organizations and individuals are often faced with the problem of allocation of limited resources to a number of competing projects. The tendency in the past has been towards the use of cost-benefit analysis which is unsuitable for handling indivisible projects or ventures. The acceptance of much more appropriate mathematical programming techniques such as dynamic programming has been slow due to their relative computational difficulty. This paper presents an interactive microcomputer program, MAXRETURN, applicable to all types of projects, indivisible or otherwise, using dynamic programming techniques. It does not require the user to have prior knowledge of dynamic programming or optimization techniques. Use of the program is illustrated with an example.