Opportunity cost management in project portfolio selection with divisibility

Zhiming Zhong, Xingmei Li, Xiaoyan Liu and William Lau

Journal of the Operational Research Society, 2019, vol. 70, issue 7, 1164-1178

Abstract: This paper addresses project portfolio selection with divisibility, where cash flow and opportunity cost are simultaneously considered for the first time. If a project is selected, fixed assets required to execute the project will be occupied during its lifetime. The opportunity cost should be considered due to the commitment of fixed assets. An integrated profit analysis method is proposed to simultaneously consider cash flow and opportunity cost in divisible project portfolio selection. To derive the combination of projects as well as the schedule of selected projects, a mixed integer linear program is provided. A real-world case is used to illustrate the capability and characteristics of our proposed models.

Date: 2019
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DOI: 10.1080/01605682.2018.1506546

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