A discussion of appropriate transformations that effectively reduce nonlinear zero-one formulations to equivalent linear zero-one formulations. The transformation is applied to a particular type of investment problem in which the high-risk investment alternatives have nondeterministic interrelated cash flows subject to multiperiod probabilistic budget constraints. A computer program was used to make the necessary transformation and solve the resulting problems of up to 45 variables and 80 constraints with a modified version of the Balas algorithm. Additional improvements suggested in RM-5406 for zero-one solution techniques will further the usefulness of this method.
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