• Journal of the Korean Operations Research and Management Science Society
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• v.16 no.1
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• pp.135-146
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• 1991

This paper shows the infinite horizon model of Partially Observable Markov Decision Process with lagged information. The lagged information is uncertain delayed observation of the process under control. Even though the optimal policy of the model exists, finding the optimal policy is very time consuming. Thus, the aim of this study is to find an .eplison.-optimal stationary policy minimizing the expected discounted total cost of the model. .EPSILON.- optimal policy is found by using a modified version of the well known policy iteration algorithm. The modification focuses to the value determination routine of the algorithm. Some properties of the approximation functions for the expected discounted cost of a stationary policy are presented. The expected discounted cost of a stationary policy is approximated based on these properties. A numerical example is also shown.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.13 no.21
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• pp.25-28
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• 1990

In this paper we consider the one-period inventory model in which it is required to determine the selling quantity which maximizes the probability of realizing a predetermined level of profit L. The Assumptions used in this paper are willing to accept the rel life considerations, which are thestochasic supply, the discounted selling price and the discounted purchasing cost for the over-supply etc.

• IE interfaces
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• v.18 no.2
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• pp.184-192
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• 2005

In recent research there has been intense interest in understanding how real option valuation (ROV) approaches might usefully complement conventional discounted cash flow (DCF) techniques. However, investment decision makers in a real world have been worried about adopting the ROV approaches mainly because of difficulty in technically understanding the theory of the ROV approaches as indicated by many researchers. With this difficulty in mind, we propose the opportunity cost model as another discrete-time model to value a deferral option. The main advantage of observing a real options value in terms of the opportunity cost concept is to provide a technique for practitioners to estimate a wide range of real options values without sticking to a financial option modelling. The fundamental ground for developing the opportunity cost model proposed in this paper lies in the work of dissecting the structure of the real options value into three categories: capital gain, expected opportunity loss, and expected opportunity gain. At the end of the paper, we will present a short illustrative example to demonstrate the applicability of the model.

• Journal of Korean Institute of Industrial Engineers
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• v.21 no.3
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• pp.299-311
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• 1995

Conventional discounted cash flow techniques fail to capture the risk associated with investments. This paper proposes an annual cash flow model that considers risk, cost structure and inventory liquidation in the evaluation of investment alternatives. The risk differential of investments is included using the capital asset pricing model while the stochastic version of the cost-volume-profit approach is used to consider inventory liquidation and cost structure. Tradeoffs between fixed and variable costs have been investigated, and portrayed using iso-cash flow curves. The proposed cash flow model has been developed, in particular, to enable an accurate evaluation of advanced manufacturing systems.

• Journal of Korean Society for Quality Management
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• v.16 no.1
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• pp.78-87
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• 1988

The purpose of this study is to develop the algorithm applicable to the integrated production inventory model under quantity discount. To achieve this purpose, the integrated production inventory model which unifies the inventory problem of raw materials and the finished product for a single product manufacturing system is considered. The product is manufactured in batches and the raw materials are obtained from outside suppliers but some of the raw materials are discounted according to the purchasing quantity. The intergrated production inventory problem considered in this study is formulated by the non-linear mixed integer programming model, and the optimal solution is obtained by using the algorithm developed by Goyal. Then, the algorithm developed by this study is applied to the quantity discount problem, and the optimal solution is revised by this results. The quantity discount algorithm of the integrated production inventory model developed by this study gives a systematic procedure to obtain the optimum policy to minimize the total cost in any case. The numerical example involving 20 raw materials and 5 raw materials among them are discounted according to the purchasing quantity is given to verify the mathematical model and the algorithm developed in this study.

• Asian Journal of Innovation and Policy
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• v.6 no.2
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• pp.225-244
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• 2017

When evaluating the economic value of technology or business project, we need to consider the period and cost for commercialization. Since the discounted cash flow (DCF) method has limitations in that it can not consider consecutive investment or does not reflect the probabilistic property of commercialization cost, we often take it desirable to apply the concept of real options with key metrics of underlying asset value, commercialization cost, and volatility, while regarding the value of technology and investment as the opportunity value. We at this moment provide more elaborated real options model with the effective region of volatility, which reflects the uncertainty in the option pricing model (OPM).

• Journal of Korean Society of Coastal and Ocean Engineers
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• v.29 no.2
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• pp.109-120
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• 2017

A discounted cost model for preventive maintenance of armor units of rubble-mound breakwaters is mathematically derived by combining the deterioration model based on a discrete-time stochastic process of shock occurrence with the cost model of renewal process together. The discounted cost model of condition-based maintenance proposed in this paper can take into account the nonlinearity of cumulative damage process as well as the discounting effect of cost. By comparing the present results with the previous other results, the verification is carried out satisfactorily. In addition, it is known from the sensitivity analysis on variables related to the model that the more often preventive maintenance should be implemented, the more crucial the level of importance of system is. However, the tendency is shown in reverse as the interest rate is increased. Meanwhile, the present model has been applied to the armor units of rubble-mound breakwaters. The parameters of damage intensity function have been estimated through the time-dependent prediction of the expected cumulative damage level obtained from the sample path method. In particular, it is confirmed that the shock occurrences can be considered to be a discrete-time stochastic process by investigating the effects of uncertainty of the shock occurrences on the expected cumulative damage level with homogeneous Poisson process and doubly stochastic Poisson process that are the continuous-time stochastic processes. It can be also seen that the stochastic process of cumulative damage would depend directly on the design conditions, thus the preventive maintenance would be varied due to those. Finally, the optimal periods and scale for the preventive maintenance of armor units of rubble-mound breakwaters can be quantitatively determined with the failure limits, the levels of importance of structure, and the interest rates.

• Clean Technology
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• v.29 no.1
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• pp.53-58
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• 2023

This study shows the summary of the economic performance of excess electricity conversion to hydrogen as well as methane and returned conversion to electricity using a fuel cell. The methane production process has been examined in a previous study. Here, this study focuses on the conversion of methane to electricity. As a part of this study, capital expenditure (CAPEX) is estimated under various sized plants (0.3, 3, 9, and 30 MW). The study shows a method for economic optimization of electricity generation using a fuel cell. The CAPEX and operating expenditure (OPEX) as well as the feed cost are used to calculate the discounted cash flow. Then the levelized cost of returned electricity (LCORE) is estimated from the discounted cash flow. This study found the LCORE value was ¢10.2/kWh electricity when a 9 MW electricity generating fuel cell was used. A methane production plant size of 1,500 Nm³/hr, a methane production cost of $11.47/mcf, a storage cost of $1/mcf, and a fuel cell efficiency of 54% were used as a baseline. A sensitivity analysis was performed by varying the storage cost, fuel cell efficiency, and excess electricity cost by ±20%, and fuel cell efficiency was found as the most dominating parameter in terms of the LCORE sensitivity. Therefore, for the best cost-performance, fuel cell manufacturing and efficiency need to be carefully evaluated. This study provides a general guideline for cost performance comparison with LCORE.

• Journal of Korean Institute of Industrial Engineers
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• v.17 no.2
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• pp.107-113
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• 1991

This article develops a control model for an open queueing network in terms of both the input and the output processes with stochastic intensities. The input and the output intensities are subject to some capacity limits and optimum control is characterized by a threshold type with a finite upper barrier. A discounted profit is used as a decision criteria, which is revenue minus operating and holding cost.

• Journal of the Korean Data and Information Science Society
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• v.16 no.4
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• pp.943-949
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• 2005

An economic design of specification limits for production process of ham is considered for a given process mean in a complete inspection plan. Each ham is inspected, and if it meets the specification, it is accepted. The ham less than the lower specification limit are changed another products or at a discounted price, and those greater than the upper specification limit are reworked. A profit model is developed which involves selling price, production cost, rework cost and the cost which is incurred by imperfect quality. Methods for finding the optimal specification limits are derived for the case of piecewise linear loss function with an industrial case study.