Optimization of capital budgeting for interrelated capacity expansion projects

Ali E. Haghani, Chien Hung Wei

Research output: Chapter in Book/Report/Conference proceedingChapter

1 Citation (Scopus)

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 languageEnglish
Title of host publicationTransportation Research Record
Pages27-35
Number of pages9
Edition1400
Publication statusPublished - 1993 Dec 1

All Science Journal Classification (ASJC) codes

  • Civil and Structural Engineering
  • Mechanical Engineering

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  • Cite this

    Haghani, A. E., & Wei, C. H. (1993). Optimization of capital budgeting for interrelated capacity expansion projects. In Transportation Research Record (1400 ed., pp. 27-35)