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.