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INFINITE-HORIZON OPTIMALITY IN AN EQUIPMENT REPLACEMENT AND CAPACITY EXPANSION MODEL.
- Source :
- Management Science; Nov71, Vol. 18 Issue 3, p145-156, 12p
- Publication Year :
- 1971
-
Abstract
- The problem faced by a single-product firm that must choose among alternative investments in capital equipment to meet a known demand for capacity in each discrete time period is formulated as a linear program. The formulation explicitly includes a transient set of investment opportunities which are available in early periods, as well as a stationary set which will become available in the near future. Also, no finite time horizon is placed upon the planning process. The approach taken to obtain the optimal solution to the infinite-horizon problem is to solve first a finite-horizon problem that includes a valuation of terminal capital stocks. The optimal solution to this problem is then used to construct a solution to the infinite-horizon problem that is identical to the finite-horizon solution in early periods. This construction is shown to be optimal for the infinite-horizon problem. [ABSTRACT FROM AUTHOR]
- Subjects :
- INDUSTRIAL equipment replacement cost accounting
PLANT capacity
MATHEMATICAL models of capital investments
REPETITIVE manufacturing systems
INDUSTRIAL equipment
LINEAR programming
AMORTIZATION
OPERATING costs
COST allocation
MANUFACTURING industries
OPERATIONS research
CORPORATE finance
FINANCE
Subjects
Details
- Language :
- English
- ISSN :
- 00251909
- Volume :
- 18
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- Management Science
- Publication Type :
- Academic Journal
- Accession number :
- 7153616
- Full Text :
- https://doi.org/10.1287/mnsc.18.3.145