Risk-Based ROI, Capital Budgeting, and Portfolio Optimization in the Department of Defense https://www.dau.edu
FIGURE 9. PORTFOLIO OPTIMIZATION 3 (OPNAV)
Figure 10 (Optimization 7) shows a combined view where multiple optimizations were run and compared against one another. Additional constraints can be added as needed, but the case illustration applies a $4 million budget, and no more than seven programs can be chosen at a time. In other words, the following monetary and nonmonetary portfolios were optimized: • Model 1—Maximize Monetary Values (NPV) • Model 2—Maximize OPNAVValue (i.e., SMEs’ assessments of Innovation, Capability, and Execution Health) • Model 3—Maximize All Weighted Average Nonmonetary Va lues (this is a percentage weighted average of a l l nonmonetary military values that are part of the OPNAV and COMMANDvariables, aswell as any other variables of interest to senior leadership) • Model 4—Maximize Military Command Value (i.e., SMEs’ assessments of Time to Intercept andWarfghting Impact) • Model 5—Maximize KVA Value
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Defense ARJ, January 2020, Vol. 27No. 1 : 60-107
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