Capital budgeting model for a nuclear power plant using multiattribute decision analysis

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Virginia Tech


Managers of nuclear power plants are frequently faced with complex decisions which are further complicated by potentially conflicting objectives. The capital budgeting process is one area involving these complex decisions. This paper provides a capital budgeting model for a nuclear power plant. The capital budgeting process requires allocating limited resources in an attempt to satisfy a set of potentially conflicting objectives. An analytic hierarchy structure was developed to rank the projects by priority of the goals.

A tool used in solving this capital budgeting problem was a form of linear programming known as integer programming with contingent constraints. The computer software used in this analysis was the integer programming provided in STORM Personal Version 2.0. The project alternative priority preference (APP) assignments derived from the analytic hierarchy process were used as the coefficients in the objective function. Multi-attribute decision analysis is a useful tool available to managers of nuclear power plants that can be applied to the capital budgeting process. An important aspect of this process is the methodical definition of the factors or attributes that are important to the organization.