Real-world projects often have milestones where costs are incurred or payments are received. Usually the costs are incurred relatively early, and the payments are received relatively late. Because of the time value of money, we obviously want to incur the costs as late as possible and receive the payments as early as possible.

Consider the AON diagram in Figure 15.26. As before, the circles denote activities, the arrows denote precedence relationships, and the numbers next to the circles are durations (in months). The diamonds denote milestones, and the number next to each milestone denotes the cost incurred (if negative) or the payment received (if positive) when that milestone is reached.

The problem is to maximize the NPV of all cash flows

(payments minus costs) by choosing the starting times of the activities appropriately. Develop a Solver model to do so, using an annual discount rate of 10%. (For discounting purposes, you can assume that if a milestone is reached after, say, 10 months of work, then the cost or payment is incurred at the end of month 10.)