Title page for ETD etd-06092005-133647

Document Type Master's Dissertation
Author Linstrom, Leslie
Email lesliel@icon.co.za
URN etd-06092005-133647
Document Title A portfolio approach to capital project management
Degree MEng (Industrial Engineering)
Department Industrial and Systems Engineering
Advisor Name Title
Prof P S Kruger
  • capital budgeting
  • capital projects
  • Monte Carlo simulation
  • multiple objectives
  • objective function
  • optimization
  • portfolio risk
  • portfolio of projects
  • portfolio management
  • portfolio theory
  • project risk
  • project selection
  • risk analysis
  • decision criteria
Date 2005-02-28
Availability unrestricted
The proposition of this dissertation is that superior capital budgeting solutions can be attained by not only analyzing projects individually but rather as part of a portfolio of projects that has the objective of maximizing the company’s range of multiple objectives, not only the economic benefit.

The dissertation starts with a detailed study of current techniques and an assessment of flaws and shortcomings. This study concludes with the requirements that any new approach or model must address in order to improve on the current practices. Based on these requirements, a new model is developed based on the portfolio approach that integrates all the assumptions, constraints, project and variable interrelationships. An important feature of the model is that it selects its portfolio of capital projects in such a way that it optimizes support for the company’s multiple objectives, not only the economic objective. The dissertation concludes with the application of this model to a hypothetical case.

It is concluded that, by developing and using this model, a company can improve the analysis required before capital budgets are finalized.

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