Optimal resource allocation with minimum activation levels and fixed costs

We intend to analyze a problem of optimal resource allocation with both minimum and maximum activation levels and fixed costs. The problem is shown to be NP-hard. We study the consequent MILP problem and propose a dynamic programming algorithm which exploits an efficient pruning procedure. We present an application to a portfolio optimization problem in project financing. A project financing firm partially funds different projects, using external funding sources for the partial coverage of the financial requirements of each project. (C) 2001 Elsevier Science B.V. All rights reserved.