ISSN 1068-798X, Russian Engineering Research, 2018, Vol. 38, No. 4, pp. 295–300. © Allerton Press, Inc., 2018.

Original Russian Text © E.V. Tarasova, T.Yu. Nikolenko, G.L. Gorbunov, L.V. Semina, 2017, published in STIN, 2017, No. 10, pp. 9–13.

Implementation of Investment Projects at Industrial Enterprises

E. V. Tarasova*, T. Yu. Nikolenko**, G. L. Gorbunov***, and L. V. Semina****
Moscow Aviation Institute, Moscow, Russia
*e-mail: elenavtar@mail.ru
**e-mail: engecin@mail.ru
***e-mail: grigoriy.gorbunov@rsce.ru
****e-mail: info@diomen.mai.ru

Abstract—The sequence of implementation of investment projects adopted at industrial enterprises is dis-

cussed, in the light of their financial and production resources. Hierarchy analysis and integral linear pro-
gramming are essential components of the proposed algorithm. Practical calculations for an industrial enter-
prise show that this approach is practically expedient.

Keywords: investment project, implementation sequence, optimization model, hierarchy analysis, integral
linear programming
DOI: 10.3103/S1068798X18040214

Because industrial enterprises are such multifunc-
tional organizations, different kinds of investment
projects are required. The projects have different char-
acteristics and different outcomes. The most attractive
are projects that yield the maximum benefit in mini-
mum time, with the least initial capital expenditures,
and that represent significant innovations. Less signifi-
cant projects will also be adopted if they meet the corre-
sponding economic, production, and social criteria [1].
Successful functioning of an industrial enterprise
depends on the correct sequencing of investment proj-
ect. To that end, the first stage is selection of the proj-
ects that are economically beneficial, within the
framework of the enterprise’s strategic goals.
If the selection must be made among projects that
have different goals and cost characteristics, the best
approach is hierarchy analysis.
Hierarchy analysis permits the assessment of proj-
ment program may be assessed, since the efficiency
incorporates all of the project’s characteristics [2].
By hierarchy analysis, we may rank investment
projects in terms of their significance for the enter-
prise, but without formulating an implementation
sequence. Therefore, the constraints specific to the
enterprise must be taken into account in analysis of the
project.
To calculate the maximum total effect of invest-
ments with a finite quantity of capital, we may write a
mathematical model permitting optimization by means
of the Solution Search function in Excel software.
The target function in this problem is expressed by
the formula
n
max f ( X ) = ∑ IP × x ,
i =1
i i

ects on the basis of the qualitative and quantitative where IPi is the integral efficiency of project i ; n is the
characteristics. This approach provides a mathemati-
cally formalized selection procedure, with successive number of potential investments considered; xi = 1 if
structuring of the complex problem on hierarchical project i must be financed and xi = 0 otherwise.
principles. In addition, hierarchy analysis permits The financial resources set the constraints here, as
comprehensive appraisal of investment projects, tak- follows
ing account of all the factors that directly or indirectly
affect the decision. ⎧ n
Thus, by successive pair comparison of each invest- ∑
⎪ pi × xi ≤ B;
ment project with respect to different criteria (estab- ⎪ i =1
⎪
( )
n
lished by the management of the enterprise in terms of
its goals), integral criteria are calculated for each cap- ⎨ p.cu t
⎪
CF = В −
i
∑pi +
i =1
∑CFit × xi ≥ 0, when t = 1;
ital-investment option. On the basis of the integral ⎪ n
efficiency criteria, the expediency of including a spe-
cific investment project in the enterprise’s develop- ⎩ i =1
∑
⎪CFp.cu t = CFp.cu(t −1) + CFit × xi ≥ 0, when t > 1,

295
296 TARASOVA et al.

Table 1
Characteristic Value
project 1 project 2 … project n
Variable cells x1 x2 xi xn
0 0 0 0
Integral parameter IPi IP1 IP2 IPi IPn
3
Necessary initial investment pi (10 rub) p1 p2 pi pn
Total possible initial financing, 103 rub

Table 2
Period t, yr 0 1 2 … T
Cash flow CF1 of project 1, 103 rub
Cash flow CF2 of project 2, 103 rub
…
Cash flow CFn of project n, 103 rub
n
Total cash flow ∑ CFit for the whole set of investment projects, 103 rub
i =1
Cash flow CFp.cu of investment project (cumulative total), taking account
of initial capital investments, 103 rub

where pi is the necessary initial capital investment for
project i ; B is the total possible initial financing; t is
the number of the period; CFp.cut is the cash flow for
the whole set of investment projects, expressed as the
cumulative total in period t ; CFit is the cash flow for
project i in period t ; CFp.cu(t−1) is the cumulative cash
flow for the whole set of investment projects in period
t − 1.
The model corresponds to an integral linear-pro-
gramming problem with Boolean variables.
Table 1 presents the format for the initial data in the
calculation of the target function and the first con-
straint on the optimization problem.
The investment portfolio is liquid if the cumulative
cash flow for the whole set of investment projects is
the positive cash flow formed in each period as a result
of the successful investments.
The financing of projects not included in the initial
investment program depends on additional resources
produced by the implementation of the first genera-
tion of projects [3]. Once sufficient resources have
accumulated, the enterprise has the opportunity to
undertake another project expected to improve the
cumulative cash flow. Finally, the sequence of invest-
ment projects will be such that the enterprise is able to
self-finance future projects.
The overall economic effect of this investment
program at the enterprise may be calculated from the
formula
n

∑ (1 + d ) .
NPVi
positive in all periods after the onset of investment. E = t
That constraint is reflected in Eq. (1). i =1

Table 2 presents the format for the calculations of
the constraints.
Thus, we write cash flows for the investment proj-
ects that include the cash flow from the investment
portfolio, expressed as the cumulative total due to the
initial capital investments and the positive income
from the successful investments.
Solution of the optimization problem yields an
investment program consisting of a set of investment
projects and their completion dates, taking account of
the financial resources available at the enterprise. In
addition, the enterprise obtains information regarding
Here d is the discount rate; t is the onset of project i.
Thus, the main steps in specifying the sequence of
investment projects at the enterprise are as follows.
(1) Ranking of the investment projects in order of
preference on the basis of integral efficiency charac-
teristics.
(2) Optimization to determine the priorities of the
projects such as to obtain the maximum total effect,
within the resource constraints.
(3) Calculation of the total economic effect for the
enterprise.

RUSSIAN ENGINEERING RESEARCH Vol. 38 No. 4 2018

 IMPLEMENTATION OF INVESTMENT PROJECTS AT INDUSTRIAL ENTERPRISES 297

I. Upper level of hierarchical framework Ir

Projects of Socially (a) I
1.0 0.8
industrial importance important projects 1. Industrial significance
Development of units to utilize Construction of 0.5 0.2 2. Social significance
the thermal energy of buildings a sports complex
0
Reequipment of 1 2
the sulfuric-acid store II
Development of dispatch Ir (b) (c)
system for substation grids Ir
0.4 0.35 0.35
1. NPV 0.6 0.56 1. Time to bring
Construction of an administrative 0.3 project on line
0.19 2. IRR 0.4 0.32 2. Proportion of
and residential building 0.2 0.11 3. PPd 0.12 insiders, %
Modernization of the automatic 0.1 0.2 3. Proportion of
0 4. Re 0
boiler safety systems outsiders, %
1 2 3 4 1 2 3
III
II. Intermediate level of hierarchical framework
Consumer and (d) 1. Development of units to
Economic characteristics utilize thermal energy
market characteristics IP 0.223 0.224 2. Reequipment of sulfuric-acid
0.2 0.170 store
0.130 0.128 3. Development of dispatch system
III. Lower level of hierarchical framework 0.1 0.076 4. Construction of administrative
and residential building
5. Modernization of
Time to deliver project results NPV, net present value of 0 automatic safety systems
to final customers investment 1 2 3 4 5 6 6. Construction of
(time to bring project on line) IRR, internal rate of return sports complex

Share of users employed by PPs, payback periods

corporation (proportion of Re, risk estimate
insiders, %) characterizing the most Fig. 2. System of priorities in formulating the investment
likely result of th program at a manufacturing enterprise: (a) higher-level
Share of users not employed by investment and the integral estimate in the hierarchical framework; (b, c) inte-
corporation (proportion of readiness of the enterprise gral estimates of economic criteria (IP = 0.25) and con-
outsiders, %) for the project sumer and market criteria (IP = 0.75); (d) final integral
assessment of projects: (I, II, III) first, second, and third
Fig. 1. Classification of investment projects on the basis of levels in the hierarchical framework; Ir, rank indices;
a hierarchical framework. IP, value of integral parameter.

(4) Further correction of the initial investment pro-
gram in the course of its implementation, in response
to dynamic changes.
By means of hierarchy analysis and optimization,
the most promising investment projects correspond-
ing to the enterprise’s existing potential may be identi-
fied, in conditions of indeterminacy. The integral
efficiency characteristic permits the selection of
projects most consistent with the enterprise’s strate-
gic goals. Thus, in formulation the implementation
sequence for the investment projects, the enterprise’s
development goals and resource constraints are taken
into account [4].
For the example of a large manufacturing enter-
prise, we now consider the determination of the
implementation sequence for investment projects.
Manufacturing enterprises supplying state orders
must operate within tight investment windows, but it is
possible to manage the capital investments in projects
of no interest to the state. These projects are important
to the enterprise’s productive and social role. Since the
enterprise will have many such projects, considerable
resources are required for their implementation [5].
The management of the enterprise may expediently
determine the implementation sequence with a view to
effective use of the available capital. In Fig. 1, we show
the hierarchical framework for the characteristics
employed in assessing the investment projects and the
list of projects under consideration at the enterprise.
On the basis of the balanced system of characteris-
tics, integral analysis of the investment projects per-
mits their ranking in terms of the enterprise’s strategic
goals.
The integral assessment of each level in the hierar-
chical framework is shown in Fig. 2.
For the investment projects, the optimization
problem is written on the basis of the calculated val-
ues of the integral characteristics. The constraints
here are the initial financial resources of the enter-
prise (35 million rub) and the requirement of a posi-
tive cumulative cash flow in all periods after the onset
of the investment program.
Table 3 presents the initial data for the optimization
problem.
Solution of the optimization problem indicates that
the enterprise may finance four of the six investment
projects initially.
(1) Development of units to utilize the thermal
energy of buildings.
(2) Reequipment of the sulfuric-acid store.
(3) Development of a dispatch system for the sub-
station grids.

RUSSIAN ENGINEERING RESEARCH Vol. 38 No. 4 2018

 Table 3. Initial working table
298

Characteristics
Variable cells X1 X2 X3 X4 X5 X6
Search parameters
0 0 0 0 0 0 0

Optimization of target function:

Target
Integral parameter PIi 0.2231 0.1302 0.17 0.224 0.1283 0.076 0 To: Maximum Minimum Value

Change of variable cell:

Resource
consumption, function f(x)
Necessary investment pi, 103 rub 4000 15000 3798 122300 13130 2710 With constraints:
Total possible investment B, 35000 binary
3
10 rub
Period (months of year) 0 1 2 3 4 5 6 7 8 9 10 11 12
Cash flow of project: develop- 0 0 0 0 0 0 0 0 0 0 0 0 0
ment of units to utilize thermal
energy, 103 rub
Cash flow of project: reequip- 0 0 0 0 0 0 0 0 0 0 0 0 0
ment of sulfuric-acid store,
103 rub
TARASOVA et al.

No constraint on nonnegative values

Cash flow of project: develop- 0 0 0 0 0 0 0 0 0 0 0
Select
ment of dispatch system, 103 rub Find solutions with
method of
Cash flow of project: construc- 0 0 0 0 0 0 0 0 0 0 0 0 0 solution:
tion of administrative and resi-
dential building, 103 rub Method of solution
Cash flow of project: modern- 0 0 0 0 0 0 0 0 0 0 0 0 0

RUSSIAN ENGINEERING RESEARCH

ization of automatic safety sys-
tems, 103 rub For smooth nonlinear problems, use
Cash flow of project: construc- 0 0 0 0 0 0 0 0 0 0 0 0 0

Vol. 38
tion of sports complex, 103 rub
Cash flow of investment pro- 35000 0 0 0 0 0 0 0 0 0 0 0 0
gram, taking account of capital Apply

No. 4
outlays, 103 rub
Cumulative cash flow of invest- 35000 35000 35000 35000 35000 35000 35000 35000 35000 35000 35000 35000 35000
ment program, taking account

2018
of capital outlays, 103 rub
 Table 4

Period (month of year)

Cash flow
of project,
103 rub
0 1 2 3 4 5 6 7 8 9 10 11 12

Development of –4000 1606.12 1606.12 1606.12 1606.12 1606.12 1606.12 1606.12 1606.12 1606.12 1606.12 1606.12 1606.12
units to utilize
thermal energy

RUSSIAN ENGINEERING RESEARCH

Reequipment of –15000 2810 2810 2810 2810 2810 2810 2810 2810 2810 2810 2810 2810

Vol. 38
sulfuric-acid store

No. 4
Development of –1266 –2532 1456 1456 1456 1456 1456 1456 1456 1456 1456 1456 1456

2018
dispatch system

Construction of –2710 1051.76 1051.76 1051.76 1051.76 1051.76 1051.76 1051.76 1051.76 1051.76 1051.76 1051.76 1051.76
sports complex

Construction of –36150 –30000 –20000 –16150 –15000 –5000 27600 26820

administrative and
residential building
IMPLEMENTATION OF INVESTMENT PROJECTS AT INDUSTRIAL ENTERPRISES

Modernization of –13130 1991.71 1991.71 1991.71 1991.71 1991.71 1991.71

automatic safety
systems
299
300 TARASOVA et al.

(4) Construction of a sports complex. Table 4 illustrates the implementation of the

In the fifth year of this investment program, the
resources generated will permit investment in a fifth
project: construction of an administrative and resi-
dential building. In the sixth year, the final project
may be financed: modernization of the automatic
safety systems.
investment project.
Additional financing for investment may appear in
the future. In that case, the sequence of the implemen-
tation of investment projects is corrected.
The overall economic effect E of the chosen
sequence for the enterprise is as follows

NPV1 NPV2 NPV3 NPV4 NPV5 NPV6

E = + + + + +
(1 + 0.14 ) (1 + 0.14 ) (1 + 0.14 ) (1 + 0.14 ) (1 + 0.14 ) (1 + 0.14 )6
0 0 0 0 5

= 5091.11 + 905.42 + 3479.53 + 3243.29 + 235.06 (1.14 5 ) + 61.35 (1.146 ) = 12 869.381 03  rub. 

Thus, the proposed approach to deciding the
sequence of implementation of investment projects
may be successfully applied in industrial practice. In
addition, by means of hierarchy analysis and the opti-
mization model, all the investment conditions and the
strategic goals of the enterprise may be taken into
account.
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Translated by Bernard Gilbert

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