This paper investigates a regulated company's capacity choices for a two-stage investment opportunity with growth options, if the company faces a cost-based regulation. It uses a theoretical approach: A discrete-time mathematical model which is solved analytically. For new technologies like broadband telecommunications with optic fiber or smart grids a specific investment behavior can be observed: Companies will first invest a small capacity in order to enter the market, but will wait for future developments of demand or the technology before they expand their capacity. Hence, growth options for the company arise. However, those companies, which are often network operators, have to face a governmental regulation which influences their investment decisions. It has been shown in previous research that especially a cost based remuneration strongly affects a company’s investment decisions and causes underinvestment. However, the described specific investment behavior has not been modeled in any paper yet. Hence, this paper makes a contribution by modeling the influence of a cost based remuneration on a regulated company’s investment behavior in this specific situation.In order to do so, first, it is shown that at the first stage of the investment, the company will clearly underinvest from the regulator's perspective. However, such a statement is not possible for the investment at the second stage. Second, it is shown that in contrast to a one-time investment decision with a NPV of zero, at the second stage, the company obtains a positive NPV. Third, the possibility of strategically shifting capacity over time is analyzed. I find that, since the company's NPV will decrease if it invests less than the optimal capacity at the first stage, such a strategic shift of capacity will only be pursued if there is high uncertainty about future developments.