Abstract
ABSTRACT In 1993, Arcelus and Srinivasan [1] considered a comprehensive model integrating the main components of working capital decisions within a discounted cash flow framework. They presented three approximations to the optimal procurement policy. Sometimes, however, these approximations may yield significant cost penalties. This paper first proves that the objective functions of discounted infinite horizon present value are concave. Second, bounds for the optimal procurement policy are derived. Third, with these bounds, a simple and accurate algorithm to locate the optimal procurement policy is developed, Finally, numerical examples are given to illustrate the algorithm.
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