A product portfolio approach is used in this dissertation to develop a model permitting capital budgeting to be modeled interactively with aggregate production planning, in light of market supply and demand functions. Primary emphasis is on the maximization of profit, but other goals are also addressed. These are maximization of the rate of return, maximization of market share, and minimization of the cost of excess capacity. A linear mixed integer programming model is developed for each of these objectives. Then, a single goal programming model that combines all four objectives is formulated. Costs are not allocated to products. Accordingly, the notion of cash flows per product (or per project) is not used. Instead, cost is incurred as a result of the demand that a product portfolio places on resources. All costs are considered to be incurred in the acquisition and utilization (in the form of activities) of resources. Four distinct levels of activities are considered: unit, batch, product sustaining, and facility sustaining. The demand for each resource is aggregated over all levels of variability and over all the products in the product portfolio. The direct cash outflow or inflow as a result of changing resource capacity is continuously traded off against the eventual cost or benefit of changing the capacity (in the form of changed revenues and as a function of both time and market supply and demand). Capital structure and capital investment decisions are considered simultaneously for a given set of assumptions. Different sources of funds are utilized for different costs of capital. Lending and borrowing are simultaneously incorporated without the solutions becoming inconsistent due to incorrect or inappropriate discount factors. This is mainly attributable to the fact that the organization, as a single entity that manufactures a product portfolio, demands capital, and invests excess funds. The net present value of the organization (not of projects or products) is maximized. Also, the output of each project is modeled specifically. This alleviates the practical problem of fractional acceptance of projects. Variable market supply and demand functions are also included and modeled explicitly. Finally, it is shown that the developed model contains several elements of aggregate production planning. The main conclusions from this research are: 1) Better capital budgeting results can be obtained if costs are not allocated to projects (or products) when resources are shared among different projects or products; 2) Financing and investment decisions can be made interactively (with the developed model) without the solutions becoming inconsistent due to unknown discount rates; 3) Resource acquisition and resource consumption should be modeled explicitly in capital budgeting; and 4) The model yields an improvement over existing capital budgeting techniques for a given set of assumptions. Some recommendations are presented for further research to extend these conclusions. / Ph. D.