Abstract
We deal with the problem of making capital investments in machines for manufacturing a product. Opportunities for investment occur over time, every such option consists of a capital cost for a new machine and a resulting. productivity gain, i.e., a lower production cost for one unit of product. The goal is that of minimizing the total production and capital costs when future demand for the product being produced and investment opportunities are unknown. This can be viewed as a generalization of the ski-rental problem and related to the mortgage problem [3].
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