Abstract
The problem in which a firm has to meet the demand for the services of several distinct but related equipment over a planning horizon is considered. An equipment of one type can be converted into an equipment of the other type at some costs. Hence demands may be met by direct capacity installation (expansion) or by conversion from another type of equipment. Capacity installation and conversion costs are assumed to be concave reflecting possible economies of scale in these activities. The objective is to find a policy of capacity installations and conversions between the types of equipment such that the present value of the total installation and conversion costs is minimized. The problem is formulated and given a network representation. A dynamic programming algorithm, an extension and refinement to that developed in [2] , is then developed which can be used to solve the problem efficiently when the number of distinct equipment is not too large.
