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On Maximizing the Net Present Value of a Project Under Renewable Resource Constraints

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Author Info

  • Mario Vanhoucke

    ()
    (Operations Management Group, Department of Applied Economics, Katholieke Universiteit Leuven, Naamsestraat 69, B-3000 Leuven, Belgium)

  • Erik Demeulemeester

    ()
    (Operations Management Group, Department of Applied Economics, Katholieke Universiteit Leuven, Naamsestraat 69, B-3000 Leuven, Belgium)

  • Willy Herroelen

    ()
    (Operations Management Group, Department of Applied Economics, Katholieke Universiteit Leuven, Naamsestraat 69, B-3000 Leuven, Belgium)

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    Abstract

    In this paper we study the resource-constrained project-scheduling problem with discounted cash flows. Each activity of this resource-constrained project-scheduling problem has certain resource requirements and a known deterministic cash flow that can be either positive or negative. Deterministic cash flows are assumed to occur over the duration of the activities. Progress payments and cash outflows occur at the completion of activities. The objective is to schedule the activities subject to a fixed deadline to maximize the net present value subject to the precedence and resource constraints. With these features the financial aspects of project management are taken into account.We introduce a depth-first branch-and-bound algorithm that makes use of extra precedence relations to resolve a number of resource conflicts and a fast recursive search algorithm for the max-npv problem to compute upper bounds. The recursive search algorithm exploits the idea that positive cash flows should be scheduled as early as possible while negative cash flows should be scheduled as late as possible within the precedence constraints. The procedure has been coded in Visual C++, Version 4.0 under Windows NT, and has been validated on two problem sets.

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    File URL: http://dx.doi.org/10.1287/mnsc.47.8.1113.10226
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 47 (2001)
    Issue (Month): 8 (August)
    Pages: 1113-1121

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    Handle: RePEc:inm:ormnsc:v:47:y:2001:i:8:p:1113-1121

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    Related research

    Keywords: Resource-Constrained Project Scheduling; Discounted Cash Flows; Branch-And-Bound;

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    Cited by:
    1. Vanhoucke, M., 2006. "A scatter search procedure for maximizing the net present value of a project under renewable resource constraints," Vlerick Leuven Gent Management School Working Paper Series 2006-40, Vlerick Leuven Gent Management School.
    2. Mika, Marek & Waligora, Grzegorz & Weglarz, Jan, 2005. "Simulated annealing and tabu search for multi-mode resource-constrained project scheduling with positive discounted cash flows and different payment models," European Journal of Operational Research, Elsevier, vol. 164(3), pages 639-668, August.
    3. M. Vanhoucke, 2006. "An efficient hybrid search algorithm for various optimization problems," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/365, Ghent University, Faculty of Economics and Business Administration.
    4. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Comparison of the Investment Behavior of German and Kazakhstani Farmers: an Experimental Approach," Discussion Papers 122422, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    5. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "The comparison of investment behaviors of Kazakhstani and German farmers: An experimental approach," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134770, Agricultural Economics Society.
    6. Chen, Jiaqiong & Askin, Ronald G., 2009. "Project selection, scheduling and resource allocation with time dependent returns," European Journal of Operational Research, Elsevier, vol. 193(1), pages 23-34, February.
    7. Vanhoucke, Mario & Demeulemeester, Erik & Herroelen, Willy, 2003. "Progress payments in project scheduling problems," European Journal of Operational Research, Elsevier, vol. 148(3), pages 604-620, August.
    8. M. Vanhoucke, 2007. "An electromagnetic time/cost trade-off optimization in project scheduling," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/457, Ghent University, Faculty of Economics and Business Administration.
    9. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Experimental examination of land investment decisions with volatile returns A comparison between Kazakhstani and German farmers," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122454, European Association of Agricultural Economists.
    10. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Comparison of the investment behavior of Kazakhstani and German farmers: An experimental approach," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125218, International Association of Agricultural Economists.
    11. Mario Vanhoucke, 2002. "Optimal due date assignment in project scheduling," Vlerick Leuven Gent Management School Working Paper Series 2002-19, Vlerick Leuven Gent Management School.
    12. M. Vanhoucke, 2004. "Work Continuity Constraints In Project Scheduling," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/265, Ghent University, Faculty of Economics and Business Administration.
    13. Bogumila Krzeszowska, 2013. "Three step procedure for a multiple criteria problem of project portfolio scheduling," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 4, pages 55-74.

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