Capital Budgeting with Multiple Criteria and Multiple Decision Makers: A Fuzzy Approach
Yong Shi*, Wikil Kwak**, Heeseok Lee*** and Cheng-few Lee****
*College of Information Science and Technology University of Nebraska at Omaha Omaha, NE 68182
**Department of Professional Accounting College of Business Administration University of Nebraska at Omaha Omaha, NE 68182
***Department of Management Information Systems Korea Advanced Institute of Science and Technology, Seoul, South Korea 207-43
****Department of Finance School of Business Rutgers University New Brunswick, NJ 08903
A capital budgeting model with multiple criteria and multiple decision makers (MCMDM) is more likely to provide realistic solutions than linear or goal programming models. This paper adopts a fuzzy approach to solve MCMDM capital budgeting problems. This approach is based on two fundamental human cognitive processes: (i) all decision makers who are involved in the capital budgeting problem have goal setting and compromise behavior for seeking multiple criteria, and (ii) each decision maker has a preference for the budget availability level. A solution procedure is proposed to systematically identify a fuzzy optimal selection of possible projects that can not only reach the best compromise value for the multiple criteria, but also use the best budget availability level according to the multiple decision makers’ preferences. The optimal selection can help the firm make a realistic decision regarding its strategic investment. A comparison study of the fuzzy approach with other approaches shows the advantages of using the fuzzy approach.
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