European Institute for Advanced Studies in Management: Working Paper
75-5. February 1975. 35 pages. Presented at the Conference on
Financial Theory and Decision Models, June 18-22, 1974, in
Garmisch-Partenkirchen.
Several authors have presented mathematical programming models for
the planning of production in a multinational firm. The planning of
cash flows has also been treated under the assumption that the
production flows have first been fixed at a preceding planning
stage. The separation of the treatment of physical and financial
flows is a simplification, however, which can lead to nonoptimal
total plans under the present system of floating currencies.
The purpose of the paper is to develop a two-stage linear programming (linear programming under uncertainty) model of a multinational firm for the joint planning of physical and financial flows in an environment where currency adjustments are to be expected.