Abstract
The current structure of Landmark University (LU) was induced by raising a generation of solution providers through a qualitative and life-applicable training system that focuses on values and creative knowledge by making it more responsive and relevant to the modern-day demands of demonstration, industrialization and development. The challenge facing Landmark University is the question of which of its numerous projects they should invest to give maximum output with minimum input. In this paper, we maximize the Net Present Value (NPV) and maintain the net discount cash overflow of each project per period as contained and extracted as the secondary data of cash inflows of the Landmark University (LU) monthly financial statement and annual reports from 2012 to 2017 of which the documents have been regrouped as small and large scale projects as many enterprises make more use of the trial-and-error method and as such firms have been finding it difficult in allocating scarce resources in a manner that will ensure profit maximization and/or cost minimization with a simple and accurate decision making by the company through an optimization principle in selecting LU project under multi-period capital rationing using linear programming (LP) and integer programming (IP). The annual net cash flow which is the difference between the cash inflows and cash outflows during each period for the project was estimated and recorded. The discount factors were estimated at cost of capital of 10% for each cash flow per period with the corresponding NPV at 10% which revealed that the optimal decision achieves maximum returns of $110 × 102 and this assisted the project manager to select a large number of the variable projects that can maximize the profit which is far better than relying on an ad-hoc judgmental approach to project investment that could have cost 160 × 102 for the same project. Sensitivity analysis on the project parameters are also carried out to test the extent to which project selection is sensitive to changes in the parameters of the system revealed that a little reduction and or addition of reduced cost by certain amount or percentages to its corresponding coefficient in the objective function effect no changes in the shadow prices with solution values for variables (x1), (x4), (x5) and the optimal objective function.
Highlights
The discount factors were estimated at cost of capital of 10% for each cash flow per period with the corresponding Net Present Value (NPV) at 10% which revealed that the optimal decision achieves maximum returns of $110 × 102 and this assisted the project manager to select a large number of the variable projects that can maximize the profit which is far better than relying on an ad-hoc judgmental approach to project investment that could have cost
According to [1], the problem optimizing a factor such as net profit value (NPV) in where resources are limited and funds available over the periods are considered will be recognized as a situation where linear programming and integer programming could be used to solve the problem of which both LP and IP have been used successfully in solving multi-period capital rationing problems
In this paper we have successfully examined optimization principles and its applications in selecting potential projects in Landmark University (LU) in order to maximize the returns and the profits from the batch of projects by maximizing the Net present Value (NPV) and maintain the net discount cash overflow for each project per period as contained in data collected from LU monthly financial statement and annual report from 2011 to 2016 revealed that LU will incur 1509 × 102 as unit cost or profit for a total contribution of 1027.56 × 102
Summary
According to [1], the problem optimizing a factor such as net profit value (NPV) in where resources are limited and funds available over the periods are considered will be recognized as a situation where linear programming and integer programming could be used to solve the problem of which both LP and IP have been used successfully in solving multi-period capital rationing problems. The first Mathematical programming formulation of the multi-period capital rationing (MRC) problem was provided by [2] In his work, he maximized the net discount cash inflows for the project and maintained the cash inflow and availability of resources in each period and provided a framework using a deterministic linear programming approach. He maximized the net discount cash inflows for the project and maintained the cash inflow and availability of resources in each period and provided a framework using a deterministic linear programming approach He used Net Present Value (NPV) in the model as an objective function. The model seeks to produce optimum solution quantities (i.e. total NPV) and the shadow cost (i.e. opportunity cost of building constraints)
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