### Abstract

A network representation procedure for the optimization of capital budgeting problems is proposed. Interrelated capacity expansion projects and discrete time decisions are considered. An alternative-based approach is proposed that yields a very neat formulation by identifying the relationships among alternatives before solving the problem. The most general pairwise interactions are considered, and a 0-1 integer program is formulated with nonlinear objective function and linear constraints. Procedures are demonstrated that convert the nonlinear program into a linear form with an embedded network structure. The out-of-kilter algorithm is applied to solve the resulting network flow problem. Because of the inherent nature of the network structure, this approach enables efficient calculation of optimal solutions for relatively large problems. Computational efficiency is shown that requires less than 3 min of central processing unit time for a system with 372 alternatives.

Original language | English |
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Title of host publication | Transportation Research Record |

Pages | 27-35 |

Number of pages | 9 |

Edition | 1400 |

Publication status | Published - 1993 |

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### All Science Journal Classification (ASJC) codes

- Civil and Structural Engineering

### Cite this

*Transportation Research Record*(1400 ed., pp. 27-35)

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*Transportation Research Record.*1400 edn, pp. 27-35.

**Optimization of capital budgeting for interrelated capacity expansion projects.** / Haghani, Ali E.; Wei, Chien-Hung.

Research output: Chapter in Book/Report/Conference proceeding › Chapter

TY - CHAP

T1 - Optimization of capital budgeting for interrelated capacity expansion projects

AU - Haghani, Ali E.

AU - Wei, Chien-Hung

PY - 1993

Y1 - 1993

N2 - A network representation procedure for the optimization of capital budgeting problems is proposed. Interrelated capacity expansion projects and discrete time decisions are considered. An alternative-based approach is proposed that yields a very neat formulation by identifying the relationships among alternatives before solving the problem. The most general pairwise interactions are considered, and a 0-1 integer program is formulated with nonlinear objective function and linear constraints. Procedures are demonstrated that convert the nonlinear program into a linear form with an embedded network structure. The out-of-kilter algorithm is applied to solve the resulting network flow problem. Because of the inherent nature of the network structure, this approach enables efficient calculation of optimal solutions for relatively large problems. Computational efficiency is shown that requires less than 3 min of central processing unit time for a system with 372 alternatives.

AB - A network representation procedure for the optimization of capital budgeting problems is proposed. Interrelated capacity expansion projects and discrete time decisions are considered. An alternative-based approach is proposed that yields a very neat formulation by identifying the relationships among alternatives before solving the problem. The most general pairwise interactions are considered, and a 0-1 integer program is formulated with nonlinear objective function and linear constraints. Procedures are demonstrated that convert the nonlinear program into a linear form with an embedded network structure. The out-of-kilter algorithm is applied to solve the resulting network flow problem. Because of the inherent nature of the network structure, this approach enables efficient calculation of optimal solutions for relatively large problems. Computational efficiency is shown that requires less than 3 min of central processing unit time for a system with 372 alternatives.

UR - http://www.scopus.com/inward/record.url?scp=0027858169&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0027858169&partnerID=8YFLogxK

M3 - Chapter

SP - 27

EP - 35

BT - Transportation Research Record

ER -