Investment model for R&D project evaluation and selection

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.