An Application of Linear Programming to Investment Analysis

"The crude ores from the LKAB mines are sorted and refined into a number of products. As there are a number of different plants the flow of material is often complex.in connection with studies of a proposed extensive investment program it was necessary to get a good measure of the changes which would be caused in the total profit by the different possible investments. A linear programming model was set up to accomplish this, and to cover the consequential effects on the production system. The objective function of the model maximized the total profit, taking into account restrictions in materials balances, blending conditions, production capacities and market. The changes in total profit resulting from the different investment alternatives, together with investment and fixed costs, were used in a series of investment analyses. The application has proved to be very successful and the results come very near to what was expected."