Answer to Question #191596 in Economics of Enterprise for nat

Question

The purchased-equipment cost for a plant which produces pentaerythritol (solidfuelprocessing plant) is $300,000. The plant is to be an addition to an existing formaldehyde plant. 

The major part of the building cost will be for indoor construction, and the contractor’s fee will 

be 7 percent of the direct plant cost. All other costs are close to the average values found for 

typical chemical plants. On the basis of this information, estimate the following: (a) The total 

direct plant cost. (b) The fixed-capital investment. (c) The total capital investment.

Answer 1

Total direct plant cost =$300, 000+fees

Contractor fees =0.07×300,000=21,000

i) Total direct plant cost =$321,000

TCI or FCI= Total direct plant cost × Ratio Factor

Using the Lang Factors for (Solid-Liquid Processing Plant)

ii) Fixed Capital Investment(FCI)

=321,000×4.3=$1,380,300

iii) Total Capital Investment (TCI)

=321,000 ×4.8=$1,540,800