A decision-making policy for capital investment concerning the size of a production unit

An important decision-making problem is the selection of the most profitable size of a production unit. A crucial criterion related to this question is the consideration of the demand distribution for the forthcoming years. In this paper the size of the production unit of a specific product, which yields the maximum value of the expected net profit, is estimated. Furthermore, the expected net profit for all the feasible cases of expansions of the production unit is examined, in order to obtain the most profitable situation. The paper is completed with an analytical numerical example.