Net Present Value Of Profits Research Articles

Long-Term Mine Planning: A Survey of Classical, Hybrid and Artificial Intelligence-Based Methods

The aim of long-term mine planning (LTMP) is two-fold: to maximize the net present value of profits (NPV) and determine how ores are sequentially processed over the lifetime. This scheduling task is computationally complex as it is rife with variables, constraints, periods, uncertainties, and unique operations. In this paper, we present trends in the literature in the recent decade. One trend is the shift from deterministic toward stochastic problems as they reflect real-world complexities. A complexity of growing concern is also in sustainable mine planning. Another trend is the shift from traditional operational research solutions — relying on exact or (meta) heuristic methods — toward hybrid methods. They are compared through the scope of the problem formulation and discussed via solution quality, efficiency, and gaps. We finally conclude with opportunities to incorporate artificial intelligence (AI)-based methods due to paucity, multiple operational uncertainties simultaneously, sustainability indicator quantification, and benchmark instances.

Determining the Appropriate Minimum Effort Levels for Use in Fisheries Dynamic Bioeconomic Models

Managing fisheries to achieve ecological, economic and social sustainability is complex. The use of dynamic bioeconomic models can be and have been used to assist in determining management targets. However, optimizing profits over time can result in large reductions in fishing effort in the short term with adverse social consequences. There exist other benefits from maintaining fishing effort even in adverse conditions (e.g., maintain crew and fleet capacity). For this reason, many bioeconomic models have included some form of minimum effort, catch or short-term profit constraint. In this paper, we consider a range of approaches to assess an appropriate minimum fishing effort, including the estimation of fishery breakeven effort levels, and approaches based on historical fishing levels. These are tested using a bioeconomic model currently used for fishery management. We find that breakeven approaches tend to result in the most conservative effort levels and the highest net present value of profits. In contrast, using a proportion of the moving average of the observed fishing effort results in less conservative change in effort, while resulting in positive changes in the net present value of fishery profits. The approach also has the advantage of being dynamic, adjusting with recent fishery conditions.

Distributed or centralized? Long-term dynamic allocation and maintenance planning of modular equipment to produce multi-product natural gas based on life cycle thinking

With the increasing complexity of the natural gas trading market, enhancing the flexibility of multi-product natural gas production has practical significance for improving the whole life cycle benefits of gas fields. At present, the collaborative relationship between multi-product process optimization and modular equipment has not been studied enough; there is still a lack of integrated model coupling process optimization, modular equipment design, and scheduling optimization. Therefore, this paper utilizes the convenient scheduling technique across multiple blocks and establishes a distributed multi-product natural gas processing model based on life cycle thinking, facilitating the enduring, dynamic configuration and upkeep administration of modular equipment. The established optimization model is formulated to maximize the net present value of profits, allowing for the selection of optimal production strategy for various natural gas products, such as LNG (Liquefied Natural Gas), CNG (Compressed Natural Gas), NG (Natural Gas), mainly including volume distribution, capacity of gas, and installation, utilization, inter-block scheduling, and recovery of modular equipment, etc. Modular equipment within multiple blocks can be dynamically adjusted based on the production status of the gas field and the market demand for multi-product natural gas. By researching actual production cases, the effectiveness and reliability of this approach have been verified. The results indicate that the net present value of the equipment cost is 89 % of the traditional equipment, which significantly improves production system flexibility and economic benefits of the gas field. This study proposes new operational and management ideas for future distributed multi-product production models in gas fields by considering the efficiency of natural gas resource development and utilization, as well as the risk resistance of the multi-product natural gas industry chain.

A Long-term Policy to Mitigate Load Shedding by Hydro Investment in Nepal

Nepal has been facing acute load shedding problem though it has a large potential for hydropower generations. The load shedding, which increased significantly over the past decade, has hindered overall economic growth of the nation. Several previous researchers concluded that the load shedding problem can be abolished with the dynamic pricing policy in short-run. They do not talk much about long-term solution. However, the hypothesis of this study is that the foreign direct investment policy for deficit financing of hydropower projects can eradicate the capacity shortage, increase the electricity supply, and mitigates the load shedding problem in long-run. 
 As load shedding is a dynamic problem that requires analysis by dynamics models, Stella Architect software is used to analyze and find solutions to the problem. The research concludes that at least 9% of the deficit financing must be covered by the foreign direct investment to increase the hydro capacity and electricity supply to mitigate load shedding over the policy period in future. The net present value of profits of Nepal Electricity Authority, the organization with the full responsibility of the production and distribution of electricity in Nepal, with the foreign direct investment policy is almost doubled than without policy.

Oil and the U.S. stock market: Implications for low carbon policies

We extend the existing understanding of the relation between oil prices and stock markets in two ways: (1) by evaluating the effects of the oil market on the U.S. stock market, at an aggregate level and for all forty-nine U.S. industry specific portfolios, and (2) by scrutinizing the dynamic nature of this relation within a Structural Vector Autoregression (SVAR) specification for a large set of rolling samples with fixed size. Results indicate that the effect of oil prices on the U.S. stock market depends on the type and timing of the shock. An oil supply shock generally does not have a statistically measurable effect on stock market performance. Conversely, an aggregate demand shock has a positive effect on nearly all sectors while an oil-specific demand shock has a negative effect on stock returns for most industries. These results suggest that investors can shift the portfolios consistent with smaller effects of oil-related shocks and the costs of carbon taxes and/or tradeable permits may be smaller than commonly thought if stock prices represent the net present value of profits.

A dynamic model of optimal lime application for wheat production in Australia

Soil acidification due to crop removal and the use of acidifying fertilisers reduce land productivity in many agricultural systems worldwide. The most common remedy is to apply lime to the soil surface. An alternative approach is to incorporate lime into the sub‐soil. This is a more expensive option, but it substantially reduces the time required to reduce acidity in the sub‐soil horizons. This paper presents a dynamic optimisation model to determine optimal rates, frequency and methods of lime application for a wheat monoculture system in the northern part of the Western Australian wheatbelt. Results show that optimal application rates depend on rainfall levels and soil‐acidity conditions. The net present value of profit is not sensitive to the frequency of lime application. Incorporating lime into the sub‐soil increases the net present value of profit, but only by a small amount: two to four per cent in most scenarios modelled. In the process, sub‐soil lime application reduces both the optimal lime application rate and the time required for the soil pH to increase to a target level.

Joint Dynamic Pricing and Inventory Control for Perishable Products Taking into Account Partial Backlogging and Inflation

A joint dynamic pricing and inventory model by considering the inflation and time value of money where the product has a limited lifetime is developed. The selling price depends on product lifetime and customer demand rate depends on the selling price and time. Also, the shortages are considered and partially backlogged. The main goal is to determine the optimal initial selling price, the economic order quantity, and the optimal replenishment period simultaneously in order to maximize the total net present value of profit. We represent that for given any number of replenishment the function of profit is concave. In order to find the optimal solution, the presented heuristic algorithm is applied. To represent the algorithm and procedure of solution, a numerical example is solved. The results show that applying the proposed dynamic pricing approach leads to a significant improvement in profit’s retailer. Finally, sensitivity analysis of key parameters model is performed and some managerial insights are presented.

Did the Swedish Tobacco Monopoly Set Monopoly Prices?

Empirical evidence is scarce on whether firms set profit‐maximizing prices, as these typically depend delicately on details of difficult‐to‐observe strategic interactions. To avoid this problem, this paper provides a detailed case study of the Swedish Tobacco Monopoly's pricing with data from 1916 to 1959. Prices are found to be below those that maximize the expected net present value of profits. However, the difference between actual and optimal price diminishes over time, and towards the end of the period the two are almost indistinguishable. The net present value of actual profits is approximately 60% of what could have been obtained. Overall, the pricing patterns appear more consistent with the firm learning about demand conditions than being the result of maximization of something other than profits.

International Fisheries Management and Recreational Benefits: The Case of Baltic Salmon

AbstractThis article studies how accounting for the benefits of recreational fisheries affects the formation and stability of an international fisheries agreement (IFA) on the management of Baltic salmon stocks. The interaction between four countries is modelled through a partition function game, under two scenarios. In the first scenario, countries take their participation decision for the IFA based only on the net present value of profits from commercial fisheries. In the second scenario, the net present value of the recreational benefits from angling is also considered. The results show that accounting for recreational benefits leads to the formation of the grand coalition, whereas only partial cooperation occurs when payoffs are confined to profits from commercial fisheries.

International Fisheries Management and Recreational Benefits: The Case of Baltic Salmon

This article studies how accounting for the benefits of recreational fisheries affects the formation and stability of an international fisheries agreement (IFA) on the management of Baltic salmon stocks. The interaction between four countries is modelled through a partition function game, under two scenarios. In the first scenario, countries take their participation decision for the IFA based only on the net present value of profits from commercial fisheries. In the second scenario, the net present value of the recreational benefits from angling is also considered. The results show that accounting for recreational benefits leads to the formation of the grand coalition, whereas only partial cooperation occurs when payoffs are confined to profits from commercial fisheries.

Economic analysis of alternative logistics systems for Tennessee-produced switchgrass to penetrate energy markets

Growing biomass crops for energy production on low productivity lands not used for food production has been suggested as an alternative to reduce dependence on fossil fuels and to mitigate greenhouse gas emissions from transportation fuel. Switchgrass is considered a potential feedstock in various states, including Tennessee, given its high biomass content in a wide range of environments. However, its low density relative to energy value and resulting high logistics costs impede the profitability of switchgrass-based bioenergy. The objective of this study is to determine the optimal logistics configuration for a collection/distribution hub to market Tennessee-produced switchgrass for bioenergy production. A mathematical programming model integrated with a geographic information system is used to maximize the net present value of profit from a hub that serves switchgrass producers and bioenergy markets. Six logistics configurations delivering switchgrass to local or international bioenergy markets are evaluated. The results highlight the economic challenges of penetrating energy markets for a switchgrass collection/distribution hub – only one logistics configuration that targets the local market is profitable. However, serving local and international markets becomes more feasible as investment risk declines. The results imply that a clear direction for national bioenergy policy is crucial to developing a biomass feedstock for the U.S. bioenergy industry.

Economic and Ecological Outcomes of Flexible Biodiversity Offset Systems

The commonly expressed goal of biodiversity offsets is to achieve no net loss of specific biological features affected by development. However, strict equivalency requirements may complicate trading of offset credits, increase costs due to restricted offset placement options, and force offset activities to focus on features that may not represent regional conservation priorities. Using the oil sands industry of Alberta, Canada, as a case study, we evaluated the economic and ecological performance of alternative offset systems targeting either ecologically equivalent areas (vegetation types) or regional conservation priorities (caribou and the Dry Mixedwood natural subregion). Exchanging dissimilar biodiversity elements requires assessment via a generalized metric; we used an empirically derived index of biodiversity intactness to link offsets with losses incurred by development. We considered 2 offset activities: land protection, with costs estimated as the net present value of profits of petroleum and timber resources to be paid as compensation to resource tenure holders, and restoration of anthropogenic footprint, with costs estimated from existing restoration projects. We used the spatial optimization tool MARXAN to develop hypothetical offset networks that met either the equivalent-vegetation or conservation-priority targets. Networks that required offsetting equivalent vegetation cost 2-17 times more than priority-focused networks. This finding calls into question the prudence of equivalency-based systems, particularly in relatively undeveloped jurisdictions, where conservation focuses on limiting and directing future losses. Priority-focused offsets may offer benefits to industry and environmental stakeholders by allowing for lower-cost conservation of valued ecological features and may invite discussion on what land-use trade-offs are acceptable when trading biodiversity via offsets. Resultados Económicos y Ecológicos de Sistemas de Compensación de Biodiversidad Flexible Habib et al.

Assessing the effects of moving to maximum economic yield effort level in the western rock lobster fishery of Western Australia

Abstract The western rock lobster ( Panulirus cygnus ) fishery has been facing significant economic pressure from increasing costs, lower prices as well as predicted reduced catches due to low recruitment. A maximum economic yield (MEY) assessment estimated the fishing effort that would maximise the net present value of profits over 2008/09–2013/14 was about 50%–70% reduction of 2007/08 effort. The assessment accounted for fixed vessel costs and the variable pot lift cost. An important component of this assessment was the use of puerulus settlement time series that provided a reliable predictor of recruitment to the fishery 3–4 years later. This can be contrasted to most MEY assessments that would use an average catch-effort relationship rather than taking into account the expected recruitment. This predictive ability has been particularly useful as there has been a period of unusually low puerulus settlements over the 5 years (2006/07–2010/11) including the lowest two settlements in the 40-year time series. Due to the low settlements, substantial management changes were implemented in 2008/09 and 2009/10 (44% and 73% reduction in nominal fishing effort, respectively compared to 2007/08) to maintain the breeding stock at sustainable levels by having a significant carryover of legal lobsters into future years of lower recruitment. These effort reductions provided a unique opportunity to assess the economic impact of a fishery moving to an MEY effort level over two years. The CPUE increased from 1.1 kg/pot lift in 2007/08 to 1.7 and 2.7 in 2008/09 and 2009/10, respectively. These CPUEs were much higher than the expected levels (1.2 and 1.1, respectively) if the 2007/08 effort had been maintained in these two years. The vessel numbers declined by 14% and 36% in 2008/09 and 2009/10, respectively, compared to 2007/08. The fishery profit increased by AUS$13 and 49 million for 2008/09 and 2009/10, respectively, compared to that estimated if the 2007/08 effort level had continued. This assessment demonstrates the economic benefits of fishing at a level close to that estimated for MEY under an input management regime. The management decision-rule framework is currently based on having the egg production above a threshold reference level to ensure sustainability and now a target reference point based on MEY principles is also being considered.

Lessons from the long-term management plan for northern hake: could the economic assessment have accepted it?

Abstract Da Rocha, J-M., and Gutiérrez, M-J. 2011. Lessons from the long-term management plan for northern hake: could the economic assessment have accepted it? – ICES Journal of Marine Science, 68: 1937–1941. An economic working group was convened by the EU's Scientific, Technical and Economic Committee for Fisheries (STECF) in 2007 to evaluate the potential economic consequences of the long-term management plan for the northern hake (Merluccius merluccius) stock. An analysis of all the scenarios proposed by the biological assessment using the Economic Interpretation of ACFM Advice (EIAA) model showed that F at the status quo level was the best policy for both yield and profits, in terms of net present values. This result is counter-intuitive because it seems to suggest that effort costs do not influence economic indicators, whereas it is widely accepted that including costs negatively affects economic indicators. A dynamic age-structured model is applied to northern hake and shows that the optimal fishing mortality that maximizes the net present value of profits is <Fmax. The reason why the EIAA analysis was biased towards scenarios with F > Fmax is also shown.

New Alternatives in the Design and Planning of Multiproduct Batch Plants in a Multiperiod Scenario

New alternatives for the simultaneous design and planning of multiproduct batch plants in a multiperiod scenario are presented in this article. This formulation allows the flexible configuration of the plant in every time period for each product considering the assignment of parallel units of different sizes operating either in-phase or out-of-phase. Capacity expansion during the time horizon is also allowed in order to satisfy new variable requirements. For each batch stage, following the usual procurement policy, units are selected from a set of standard and discrete sizes that are available to perform each operation. The model is formulated through a mixed-integer linear programming (MILP) formulation that maximizes the net present value of profit. From the planning point of view, product sales, raw materials purchases, inventories, waste disposal, and late deliveries are taken into account. Thus, this model simultaneously solves both design and production planning for given forecasts of product demands and pricing in each time period.

Economics of Western Juniper Control in Central Oregon

The economic and ecological benefits and control costs of western juniper (Juniperus occidentalis Hook) management on rangelands are evaluated using a discrete-time, dynamic economic model developed to depict 4 representative ranches in the John Day region of north-central Oregon. The model’s optimization criterion is to maximize the net present value of profits through decisions regarding herd size and composition, cattle sales, and the manipulation of forage production through juniper management practices. Projections are made regarding the impacts of economically optimal juniper management on wildlife populations, stream flows, and erosion levels. Results consistently showed that juniper management options resulted in larger equilibrium herd sizes and greater economic returns. Erosion levels were substantially lower in scenarios that contained juniper management options. Economically optimal juniper management decisions led to increased quail and elk populations, but generally resulted in decreased deer populations. The results indicate there are both economic and ecological benefits from controlling western juniper on Oregon rangelands. Los beneficios económicos y ecológicos del manejo del “Western juniper” (Juniperus occidentalis Hook) sobre los pastizales son evaluados usando un modelo discreto-tiempo y económico dinámico, desarrollado para describir 4 ranchos representativos de la región John Day del norte-centro de Oregon. El criterio de optimización del modelo es maximizar el valor neto presente de las ganancias a través de decisiones respecto al tamaño y composición del hato, venta de ganado y la manipulación de la producción de forraje mediante practicas de manejo del “Juniper”. Las proyecciones son hechas en relación a los impactos del manejo económicamente optimo del “Juniper” sobre las poblaciones de fauna silvestre, corrientes de agua y niveles de erosión. Los resultados mostraron consistentemente que las opciones de manejo del “Juniper” resultaron en tamaños de hato de mayor equilibrio y mayores retornos económicos. Los niveles de erosión fueron substancialmente menores en escenarios que contenían opciones de manejo del “juniper”. Las decisiones del manejo económicamente optimo del “Juniper” condujeron a mayores poblaciones de codornices y alces, pero generalmente resultaron en una disminución de las poblaciones de venado. Los resultados indican que al controlar el “Western juniper” en los pastizales de Oregon se obtienen tanto beneficios económicos como ecológicos.

Economics of Western Juniper Control in Central Oregon

The economic and ecological benefits and control costs of western juniper (Juniperus occidentalis Hook) management on rangelands are evaluated using a discrete-time, dynamic economic model developed to depict 4 representative ranches in the John Day region of north-central Oregon. The model’s optimization criterion is to maximize the net present value of profits through decisions regarding herd size and composition, cattle sales, and the manipulation of forage production through juniper management practices. Projections are made regarding the impacts of economically optimal juniper management on wildlife populations, stream flows, and erosion levels. Results consistently showed that juniper management options resulted in larger equilibrium herd sizes and greater economic returns. Erosion levels were substantially lower in scenarios that contained juniper management options. Economically optimal juniper management decisions led to increased quail and elk populations, but generally resulted in decreased deer populations. The results indicate there are both economic and ecological benefits from controlling western juniper on Oregon rangelands.

Economic production lot size for deteriorating items taking account of the time-value of money

This study applies the discounted cash-flow approach to a deterministic inventory model of an item that deteriorates over time at a varying rate. An optimization framework is presented to derive optimal production and pricing policies to maximize the net present value of profits over a finite planning horizon. A numerical example is provided to illustrate the optimization procedure. Scope and purpose A deterministic inventory model for an item with price-dependent demand is developed in this study. It is assumed that the inventory deteriorates over time at a varying rate and shortages in inventory are allowed. The model considers a production environment with a finite replenishment rate. The time-value of money for various costs associated with the inventory system is also considered.

An integrated model for planning and managing multi-regional mixed-crop farming schemes

An integrated model has been developed for planning and managing multi-regional mixed-crop farming schemes across ecological zones. A net-present-value formula is also developed for calculating the inflation-adjusted net present value of profit per acre of each crop before using it (the adjusted net-present value of profit) as one of the inputs into the model. The model provides the required technical tool for selecting the best sets of crop-combinations and for determining the optimum number of acres of each selected crop to be cultivated in different ecological zones under a multi-regional mixed-crop farming scheme. It also determines the quantity of each harvested crop to be shipped from each of the ecological regions or zones to each of the warehouses covered by the scheme. Furthermore, it determines the amount of expansion/extension needed by each warehouse. The model centralizes all available resources for optimum uses in all the regions. A very simple procedure for optimizing the model is presented. Numerical examples are given to illustrate the model and to investigate the quality of results produced by the optimizing procedure. The results shows that the procedure is very efficient.

Optimum linear selection indexes for multiple generation objectives with non-linear profit functions

AbstractA method to obtain linear selection indexes that maximize objectives that involve average profit in one or more generations within a planning horizon based on non-linear profit functions, was derived through application of optimal control theory. The method involves simultaneous optimization of indexes for each generation in the planning horizon. Optimum linear indexes were found to be conform indexes derived from selection index theory, with economic values equal to a weighted sum of partial derivatives of the profit function at the trait means which result in each generation of the planning horizon. Numerical procedures to derive optimum indexes are presented. Methods and properties of alternative strategies for selection witli non-linear profit functions are illustrated for selection on egg weight and rate of lay in poultry. In the example, the additional benefit of selection indexes that maximize cumulative net present value of profit over a planning horizon of10 years was small relative to use of traditional selection procedures. Optimal indexes were also derived with a derivative-free non-linear programming optimizer, with identical results. The latter method also allows incorporation of additional constraints.Possible extensions of the optimal control methodology to address other problems related to optimization of selection over multiple generations are discussed.