Investment model for R&D project evaluation and selection

Author

Cochran, M.L. ; Pyle, E.B. ; Greene, L.C. ; Clymer, H.A. ; Bender, A.D.

Author_Institution

Smith Kline Instruments Inc., Palo Alto, CA, USA

Issue

3

fYear

1971

Firstpage

89

Lastpage

100

Abstract

A mathematical model has been developed for the purpose of assisting R&D management in their evaluation and selection responsibilities of potential R&D projects. It is composed of (1) a project evaluation module that utilizes the concept of discounted cash flow to reduce the measures of each project to a single economic index (the expected net present value) and (2) a project selection module that utilizes a linear programming algorithm with 0-1 variables to select the set of projects that maximizes the total expected net present value, while satisfying specified budget constraints. The system, having been implemented through a time-sharing computer service, is presently operational and is being used by management as a tool to assist in the R&D decision-making process.

Keywords

administrative data processing; computer applications; decision theory and analysis; modelling; research and development management; time-sharing systems; 0-1 variables; R&D management; R&D project evaluation; budget constraints; decision making process; discounted cash flow; investment model; linear programming algorithm; mathematical model; project evaluation module; project selection module; research and development project selection; single economic index; time sharing computer applications; Biological system modeling; Economics; Indexes; Investments; Marketing and sales; Presses; Sensitivity analysis;

fLanguage

English

Journal_Title

Engineering Management, IEEE Transactions on

Publisher

ieee

ISSN

0018-9391

Type

jour

DOI

10.1109/TEM.1971.6447136

Filename

6447136