IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v47y2001i8p1113-1121.html
   My bibliography  Save this article

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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Mario Vanhoucke & Erik Demeulemeester & Willy Herroelen, 2001. "On Maximizing the Net Present Value of a Project Under Renewable Resource Constraints," Management Science, INFORMS, vol. 47(8), pages 1113-1121, August.
    • Handle: RePEc:inm:ormnsc:v:47:y:2001:i:8:p:1113-1121
    DOI: 10.1287/mnsc.47.8.1113.10226
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.47.8.1113.10226
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.47.8.1113.10226?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Erik L. Demeulemeester & Willy S. Herroelen, 1997. "New Benchmark Results for the Resource-Constrained Project Scheduling Problem," Management Science, INFORMS, vol. 43(11), pages 1485-1492, November.
    2. Rainer Kolisch & Arno Sprecher & Andreas Drexl, 1995. "Characterization and Generation of a General Class of Resource-Constrained Project Scheduling Problems," Management Science, INFORMS, vol. 41(10), pages 1693-1703, October.
    3. A. H. Russell, 1970. "Cash Flows in Networks," Management Science, INFORMS, vol. 16(5), pages 357-373, January.
    4. Herroelen, Willy S. & Gallens, Els, 1993. "Computational experience with an optimal procedure for the scheduling of activities to maximize the net present value of projects," European Journal of Operational Research, Elsevier, vol. 65(2), pages 274-277, March.
    5. Elmaghraby, Salah E. & Herroelen, Willy S., 1990. "The scheduling of activities to maximize the net present value of projects," European Journal of Operational Research, Elsevier, vol. 49(1), pages 35-49, November.
    6. Erik Demeulemeester & Willy Herroelen, 1992. "A Branch-and-Bound Procedure for the Multiple Resource-Constrained Project Scheduling Problem," Management Science, INFORMS, vol. 38(12), pages 1803-1818, December.
    7. Anthony A. Mastor, 1970. "An Experimental Investigation and Comparative Evaluation of Production Line Balancing Techniques," Management Science, INFORMS, vol. 16(11), pages 728-746, July.
    8. Etgar, Ran & Shtub, Avraham & LeBlanc, Larry J., 1997. "Scheduling projects to maximize net present value -- the case of time-dependent, contingent cash flows," European Journal of Operational Research, Elsevier, vol. 96(1), pages 90-96, January.
    9. Herroelen, Willy S. & Van Dommelen, Patrick & Demeulemeester, Erik L., 1997. "Project network models with discounted cash flows a guided tour through recent developments," European Journal of Operational Research, Elsevier, vol. 100(1), pages 97-121, July.
    10. Oya Icmeli & S. Selcuk Erenguc, 1996. "A Branch and Bound Procedure for the Resource Constrained Project Scheduling Problem with Discounted Cash Flows," Management Science, INFORMS, vol. 42(10), pages 1395-1408, October.
    11. De Reyck, Bert & Herroelen, willy, 1998. "A branch-and-bound procedure for the resource-constrained project scheduling problem with generalized precedence relations," European Journal of Operational Research, Elsevier, vol. 111(1), pages 152-174, November.
    12. James H. Patterson, 1984. "A Comparison of Exact Approaches for Solving the Multiple Constrained Resource, Project Scheduling Problem," Management Science, INFORMS, vol. 30(7), pages 854-867, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kolisch, R. & Padman, R., 2001. "An integrated survey of deterministic project scheduling," Omega, Elsevier, vol. 29(3), pages 249-272, June.
    2. De Reyck, Bert & Herroelen, willy, 1998. "A branch-and-bound procedure for the resource-constrained project scheduling problem with generalized precedence relations," European Journal of Operational Research, Elsevier, vol. 111(1), pages 152-174, November.
    3. 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.
    4. He, Zhengwen & Wang, Nengmin & Jia, Tao & Xu, Yu, 2009. "Simulated annealing and tabu search for multi-mode project payment scheduling," European Journal of Operational Research, Elsevier, vol. 198(3), pages 688-696, November.
    5. Brucker, Peter & Drexl, Andreas & Mohring, Rolf & Neumann, Klaus & Pesch, Erwin, 1999. "Resource-constrained project scheduling: Notation, classification, models, and methods," European Journal of Operational Research, Elsevier, vol. 112(1), pages 3-41, January.
    6. 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.
    7. Herroelen, Willy S. & Van Dommelen, Patrick & Demeulemeester, Erik L., 1997. "Project network models with discounted cash flows a guided tour through recent developments," European Journal of Operational Research, Elsevier, vol. 100(1), pages 97-121, July.
    8. Weglarz, Jan & Józefowska, Joanna & Mika, Marek & Waligóra, Grzegorz, 2011. "Project scheduling with finite or infinite number of activity processing modes - A survey," European Journal of Operational Research, Elsevier, vol. 208(3), pages 177-205, February.
    9. Boysen, Ole & Juretzka, Jan & Kimms, Alf, 1999. "Ameisen-Systeme zur kapitalwertmaximierenden Projektplanung," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 499, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    10. 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.
    11. Wenhui Zhao & Nicholas G. Hall & Zhixin Liu, 2020. "Project Evaluation and Selection with Task Failures," Production and Operations Management, Production and Operations Management Society, vol. 29(2), pages 428-446, February.
    12. Etgar, Ran & Gelbard, Roy & Cohen, Yuval, 2017. "Optimizing version release dates of research and development long-term processes," European Journal of Operational Research, Elsevier, vol. 259(2), pages 642-653.
    13. Bert De Reyck & Erik Demeulemeester & Willy Herroelen, 1998. "Local search methods for the discrete time/resource trade‐off problem in project networks," Naval Research Logistics (NRL), John Wiley & Sons, vol. 45(6), pages 553-578, September.
    14. Joseph G. Szmerekovsky & George L. Vairaktarakis, 2006. "Maximizing project cash availability," Naval Research Logistics (NRL), John Wiley & Sons, vol. 53(4), pages 272-284, June.
    15. M. Vanhoucke, 2002. "Optimal Due Date Assignment In Project Scheduling," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/159, Ghent University, Faculty of Economics and Business Administration.
    16. 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.
    17. Sönke Hartmann, 1998. "A competitive genetic algorithm for resource‐constrained project scheduling," Naval Research Logistics (NRL), John Wiley & Sons, vol. 45(7), pages 733-750, October.
    18. Hartmann, Sönke & Briskorn, Dirk, 2010. "A survey of variants and extensions of the resource-constrained project scheduling problem," European Journal of Operational Research, Elsevier, vol. 207(1), pages 1-14, November.
    19. Dayal Madhukar & Verma, Sanjay, 2015. "Multi-processor Exact Procedures for Regular Measures of the Multi-mode RCPSP," IIMA Working Papers WP2015-03-25, Indian Institute of Management Ahmedabad, Research and Publication Department.
    20. Pfeifer, Jeremy & Barker, Kash & Ramirez-Marquez, Jose E. & Morshedlou, Nazanin, 2015. "Quantifying the risk of project delays with a genetic algorithm," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 34-44.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:47:y:2001:i:8:p:1113-1121. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.