Maximizing the net present value of a project under uncertainty: Activity delays and dynamic policies

Salim Rostami, Stefan Creemers and Roel Leus

European Journal of Operational Research, 2024, vol. 317, issue 1, 16-24

Abstract: We study a project with stochastic activity durations and cash flows; we model the uncertainty using discrete scenarios. The project entails precedence-related activities, each of which incurs a cash flow that may be positive (inflow) or negative (outflow). The problem is to find a scheduling policy that maximizes the expected net present value of the project. A scheduling policy decides the starting time of each activity under every possible realization of the unknown parameters. Ideally, one wants to expedite the inflows (e.g., incoming payments), while delaying the outflows (e.g., costs) as much as possible, without violating the project deadline. In this article, we devise an exact and a heuristic method to define policies within two new classes of scheduling policies. The first policy class generalizes all existing static policies in the literature and further illustrates the importance of intentional activity delays from both a theoretical as well as an empirical point of view. Whereas the literature on project scheduling has mainly focused on static policies, we also propose a second class of dynamic policies. We show that dynamic policies outperform static policies by means of extensive computational experiments.

Keywords: Project scheduling; Net present value; Discrete scenarios; Activity delay; Dynamic policies (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221724002297
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:317:y:2024:i:1:p:16-24

DOI: 10.1016/j.ejor.2024.03.029

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().