A General Model for Investment Policy

This article presents a mathematical model describing the most general case in equipment investment policy. A systematic study of all other cases in the order of decreasing complexity follows. The general model reduces to their present worth all disbursements and receipts involved in the possession and operation of a succession of equipment having varying initial costs, life spans, salvage values, income and cost functions. With one recent exception (1), it is a more general model than those seen by the authors. All possible special cases of the general model are presented in a systematic fashion. Finally, previous models and working decision rules are fit into the framework of this model as special cases.