Optimal investment timing and investment scale decision making under uncertainty

In the investment decision making,the enterprise focuses not only on investment timing choice, but on investment scale choice as well.Based on real options theory,by solving the analytical expression of optimal investment timing and optimal scale under the condition of fixed output and variable output,the paper studies comparatively the decision making in simultaneously selecting the optimal investment timing and optimal investment scale.The study shows that the uncertainty increases the expectation waiting value,thus the enterprise will postpone the investment and increase the investment scale.The paper also illustrates that the investment scale is associated with the uncertainty of expected market demand but not associated with a certain size of earned value,which reflects the market demand.Under the condition of variable output,the enterprise has greater investment critical value and larger investment scale.The uncertainty decreases the enterprise's capacity utilization,resulting in the existence of over-investment. Meanwhile the enterprise's capacity utilization is lower under the condition of variable output.