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Mario Vanhoucke - One of the best experts on this subject based on the ideXlab platform.
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the impact of solution rePresentations on heuristic Net Present Value optimization in discrete time cost trade off project scheduling with multiple cash flow and payment models
Computers & Operations Research, 2019Co-Authors: Mario Vanhoucke, Pieter Leyman, Niels Van Den Driessche, Patrick De CausmaeckerAbstract:Abstract The goal of this paper is to investigate the impact of different solution rePresentations, as part of a metaheuristic approach, on Net Present Value optimization in project scheduling. We specifically consider the discrete time/cost trade-off problem with Net Present Value optimization and apply three payment models from literature. Each of these models determines the timing and size of cash flows from the contractor’s viewpoint. The contribution of this paper to literature is twofold. First, we include cash flow distribution variants in the payment models, to also distinguish between different manners in which Value is created and costs are incurred, as part of a general model for the contractor’s cash flow management. This general model is developed in order to explicitly include the progress of activities in the determination of the timing and size of payments to the contractor, which is currently lacking in literature. Second, we employ an iterated local search framework to compare different solution rePresentations and their corresponding local search and repair heuristics. The goal is to unambiguously show that the choice of a solution rePresentation deserves a fair amount of attention, alongside the selection of appropriate diversification and intensification operators, even though this is not always the case in literature. Each part of the proposed algorithm is validated on a large dataset of test instances, generated to allow for a broad comparison of the solution rePresentations. Our results clearly quantify the statistically significant differences between three types of rePresentations for the project scheduling problem under study.
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capital and resource constrained project scheduling with Net Present Value optimization
European Journal of Operational Research, 2017Co-Authors: Pieter Leyman, Mario VanhouckeAbstract:In this paper, we study the capital-constrained project scheduling problem with discounted cash flows (CCPSPDC) and the capital- and resource-constrained project scheduling problem with discounted cash flows (CRCPSPDC). The objective of both problems is to maximize the project Net Present Value (NPV), based on three cash flow models. Both problems include capital constraints, which force the project to always have a positive cash balance. Hence, it is crucial to schedule activities in such an order that sufficient capital is available. The contribution of this paper is threefold. First, we propose three distinct cash flow models, which affect the capital availability during the project. Second, we introduce two new schedulers to improve capital feasibility, one for the CCPSPDC and one for the CRCPSPDC. The schedulers focus on delaying sets of activities, which cause cash outflows to be received at later time instances, in order to reduce capital shortages. Both schedulers are implemented as part of three metaheuristics from literature, in order to compare the metaheuristics’ performance. Two penalty functions have been included, one to improve capital feasibility and another to improve deadline feasibility. Third, the proposed procedure has been tested on a large dataset and the added Value of the schedulers has been validated. Managerial insights are provided with respect to the impact of key parameters.
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payment models and Net Present Value optimization for resource constrained project scheduling
Computers & Industrial Engineering, 2016Co-Authors: Pieter Leyman, Mario VanhouckeAbstract:A general scheduler for six NPV optimization models is proposed.Three different payment models are discussed in both single- and multi-mode cases.The added Value of each part of the proposed methodology is illustrated.The impact of project parameters on project NPV is analyzed in an extensive computational experiment. This manuscript focuses on the single- and multi-mode resource-constrained project scheduling problem with discounted cash flows (RCPSPDC and MRCPSPDC) and three payment models. The contribution of the paper is twofold. First, we extend a new scheduling technique, which moves activities in order to improve the project Net Present Value. This more general version is applicable to multiple problem formulations and provides an overarching framework in which these models can be implemented. The changes in activity finish times take other activities and the possible changes in the finish times of these other activities into account, by forming a set of activities which is subsequently moved in time. The scheduling technique is implemented within a geNetic algorithm metaheuristic and employs two penalty functions, one for deadline feasibility and one for non-renewable resource feasibility. Second, we test the proposed approach on several datasets from literature and illustrate the added Value of each part of the algorithm. The influence of data parameters on the project Net Present Value is highlighted. The detailed results provided in this paper can be used as future benchmarks for each of the six models discussed.
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A scatter search heuristic for maximising the Net Present Value of a resource-constrained project with fixed activity cash flows
INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH, 2010Co-Authors: Mario VanhouckeAbstract:In this paper, we Present a meta-heuristic algorithm for the resource-constrained project scheduling problem with discounted cash flows. We assume fixed payments associated with the execution of project activities and develop a heuristic optimisation procedure to maximise the Net Present Value of a project subject to the precedence and renewable resource constraints. We investigate the use of a bi-directional generation scheme and a recursive forward/backward improvement method from literature and embed them in a meta-heuristic scatter search framework. We generate a large dataset of project instances under a controlled design and report detailed computational results. The solutions and project instances can be downloaded from a website in order to facilitate comparison with future research attempts.
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On Maximizing the Net Present Value of a Project Under Renewable Resource Constraints
Management Science, 2003Co-Authors: Mario Vanhoucke, Erik Demeulemeester, Willy HerroelenAbstract: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.
Loren W Tauer - One of the best experts on this subject based on the ideXlab platform.
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ethanol plant investment using Net Present Value and real options analyses
Biomass & Bioenergy, 2009Co-Authors: Todd M Schmit, Jianchuan Luo, Loren W TauerAbstract:A real option analysis of dry-grind corn ethanol plants compared to a standard Net Present Value analysis (NPV) shows that the option Values increase entry prices and lower exit prices of investment and disinvestment considerably. For a large plant, the gross margin of ethanol price over the corn price for a gallon of ethanol using NPV shows that entry will occur with a $0.45 margin and shutdown will occur at a $0.38. Under a real options framework, the margins for entry and exit become $1.33 and $0.13, respectively. Under baseline conditions, a large operating plant would become mothballed at $0.18 and reactivate if margins rebounded to $0.66. Growth in the variability of ethanol margins will delay new plant investments, as well as exits of currently operating facilities.
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ethanol plant investment using Net Present Value and real options analyses
Biomass & Bioenergy, 2009Co-Authors: Todd M Schmit, Jianchuan Luo, Loren W TauerAbstract:Abstract A real options analysis of entry–exit decisions for dry-grind corn ethanol plants is conducted to incorporate the impact of rising volatility in market prices. For a large plant, the estimated gross margins (ethanol price less corn price), in current dollars, that induce entry and exit were 0.35 US$ dm−3 and 0.03 US$ dm−3, respectively; nearly 207% (63%) above (below) their respective Net Present Value estimates. Under baseline conditions, a large operating plant would become mothballed at 0.05 US$ dm−3 and reactivate if margins rebounded to 0.17 US$ dm−3. Growth in the variability of ethanol margins will lead to delays in new plant investments, as well as exits of currently operating facilities. To the extent that alternative renewable fuel technologies become viable, the model can be easily adapted to estimate and compare the results across alternative bioenergy investments.
Todd M Schmit - One of the best experts on this subject based on the ideXlab platform.
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ethanol plant investment using Net Present Value and real options analyses
Biomass & Bioenergy, 2009Co-Authors: Todd M Schmit, Jianchuan Luo, Loren W TauerAbstract:A real option analysis of dry-grind corn ethanol plants compared to a standard Net Present Value analysis (NPV) shows that the option Values increase entry prices and lower exit prices of investment and disinvestment considerably. For a large plant, the gross margin of ethanol price over the corn price for a gallon of ethanol using NPV shows that entry will occur with a $0.45 margin and shutdown will occur at a $0.38. Under a real options framework, the margins for entry and exit become $1.33 and $0.13, respectively. Under baseline conditions, a large operating plant would become mothballed at $0.18 and reactivate if margins rebounded to $0.66. Growth in the variability of ethanol margins will delay new plant investments, as well as exits of currently operating facilities.
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ethanol plant investment using Net Present Value and real options analyses
Biomass & Bioenergy, 2009Co-Authors: Todd M Schmit, Jianchuan Luo, Loren W TauerAbstract:Abstract A real options analysis of entry–exit decisions for dry-grind corn ethanol plants is conducted to incorporate the impact of rising volatility in market prices. For a large plant, the estimated gross margins (ethanol price less corn price), in current dollars, that induce entry and exit were 0.35 US$ dm−3 and 0.03 US$ dm−3, respectively; nearly 207% (63%) above (below) their respective Net Present Value estimates. Under baseline conditions, a large operating plant would become mothballed at 0.05 US$ dm−3 and reactivate if margins rebounded to 0.17 US$ dm−3. Growth in the variability of ethanol margins will lead to delays in new plant investments, as well as exits of currently operating facilities. To the extent that alternative renewable fuel technologies become viable, the model can be easily adapted to estimate and compare the results across alternative bioenergy investments.
Willy Herroelen - One of the best experts on this subject based on the ideXlab platform.
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On Maximizing the Net Present Value of a Project Under Renewable Resource Constraints
Management Science, 2003Co-Authors: Mario Vanhoucke, Erik Demeulemeester, Willy HerroelenAbstract: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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maximizing the Net Present Value of a project with linear time dependent cash flows
International Journal of Production Research, 2001Co-Authors: Mario Vanhoucke, Erik Demeulemeester, Willy HerroelenAbstract:The paper studies the unconstrained project-scheduling problem with discounted cash flows where the cash flow functions are assumed to be linear-dependent on the completion times of the corresponding activities. Each activity of this unconstrained project-scheduling problem has a known deterministic cash flow function that is linear and non-increasing in time. Progress payments and cash outflows occur at the completion times of activities. The objective is to schedule the activities in order to maximize the Net Present Value (npv) subject to the precedence constraints and a fixed deadline. Despite the growing amount of research concerning the financial aspects in project scheduling, little research has been done on the problem with time-dependent cash flow functions. Nevertheless, this problem gives an incentive to solve more realistic versions of project-scheduling problems with financial objectives. We introduce an extension of an exact recursive algorithm that has been used in solving the max-npv probl...
Stefan Creemers - One of the best experts on this subject based on the ideXlab platform.
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moments and distribution of the Net Present Value of a serial project
Research Papers in Economics, 2018Co-Authors: Stefan CreemersAbstract:Abstract We study the Net Present Value (NPV) of a project with multiple stages that are executed in sequence. A cash flow (positive or negative) may be incurred at the start of each stage, and a payoff is obtained at the end of the project. The duration of a stage is a random variable with a general distribution function. For such projects, we obtain exact, closed-form expressions for the moments of the NPV, and develop a highly accurate closed-form approximation of the NPV distribution itself. In addition, we show that the optimal sequence of stages (that maximizes the expected NPV) can be obtained efficiently, and demonstrate that the problem of finding this optimal sequence is equivalent to the least cost fault detection problem. We also illustrate how our results can be applied to a general project scheduling problem where stages are not necessarily executed in series. Lastly, we prove two limit theorems that allow to approximate the NPV distribution. Our work has direct applications in the fields of project selection, project portfolio management, and project valuation.
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Maximizing the expected Net Present Value of a project with phase-type distributed activity durations: An efficient globally optimal solution procedure
European Journal of Operational Research, 2018Co-Authors: Stefan CreemersAbstract:We study projects with activities that have stochastic durations that are modeled using phase-type distributions. Intermediate cash flows are incurred during the execution of the project. Upon completion of all project activities a payoff is obtained. Because activity durations are stochastic, activity starting times cannot be defined at the start of the project. Instead, we have to rely on a policy to schedule activities during the execution of the project. The optimal policy schedules activities such that the expected Net Present Value of the project is maximized. We determine the optimal policy using a new continuous-time Markov chain and a backward stochastic dynamic program. Although the new continuous-time Markov chain allows to drastically reduce memory requirements (when compared to existing methods), it also allows activities to be preempted; an assumption that is not always desirable. We prove, however, that it is globally optimal not to preempt activities if cash flows are incurred at the start of an activity. Moreover, this proof holds regardless of the duration distribution of the activities. A computational experiment shows that we significantly outperform current state-of-the-art procedures. On average, we improve computational efficiency by a factor of 600, and reduce memory requirements by a factor of 321.
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maximizing the expected Net Present Value of a project with phase type distributed activity durations an efficient globally optimal solution procedure
Research Papers in Economics, 2017Co-Authors: Stefan CreemersAbstract:We study projects with activities that have stochastic durations that are modeled using phase-type distributions. Intermediate cash flows are incurred during the execution of the project. Upon completion of all project activities a payoff is obtained. Because activity durations are stochastic, activity starting times cannot be defined at the start of the project. Instead, we have to rely on a policy to schedule activities during the execution of the project. The optimal policy schedules activities such that the expected Net Present Value of the project is maximized. We determine the optimal policy using a new continuous-time Markov chain and a backward stochastic dynamic program. Although the new continuous-time Markov chain allows to drastically reduce memory requirements (when compared to existing methods), it also allows activities to be preempted; an assumption that is not always desirable. We demonstrate, however, that it is globally optimal not to preempt activities if certain conditions are met. A computational experiment confirms this finding. The computational experiment also shows that we significantly outperform current state-of-the-art procedures. On average, we improve computational efficiency by a factor of 600, and reduce memory requirements by a factor of 321.
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scheduling markovian pert Networks to maximize the Net Present Value
Research Papers in Economics, 2010Co-Authors: Stefan Creemers, Roel Leus, Marc LambrechtAbstract:We examine project scheduling with Net Present Value objective and exponential activity durations, using a continuous-time Markov decision chain. On the basis of a judicious partitioning of the state space, we achieve a significant performance improvement as compared to the existing algorithms.
