SCHEDULING PROJECTS TO MAXIMIZE NET PRESENT VALUE - THE CASE OF TIME-DEPENDENT, CONTINGENT CASH FLOWS

The problem of scheduling activities in a project to maximize its Net Present Value (NPV) has been solved for the case where net cash flow m agnitudes are independent of the time of realization. This paper model s a more realistic version of this problem - because of incentive paym ents and penalties for early and late event occurrences, respectively, and because of changing costs of resources over time, net cash flow m agnitudes are dependent on the time of realization. We formulate an op timization program for this more general problem and present a simulat ed annealing solution approach. We test different implementation strat egies for this algorithm and suggest a method for choosing neighborhoo d moves. We compare the NPVs of the solutions obtained from our formul ation with the NPVs of early start schedules and with late start sched ules for 168 different problems. These computational results show that the simulated annealing approach consistently produces substantially better solutions than the early start or late start schedules, Even po or simulated annealing neighborhood moves give improved solutions for most problems studied.