Answer to Question #323697 in Economics of Enterprise for Soban

Question

 The 1990 cost for an installed 304 stainless steel tank weighing 135,000 kg was $1,100,000. The installed cost weight exponent for stainless steel tanks is 0.88 for a size range from 100,000 to 300,000 kg. What weight of installed stainless steel tank could have been obtained for the same capital investment as in Prob. 6-3?

Answer 1

Cost of tank weighing 450000 kg in 1990=$640000

Capacity factor=n=0.93

Cost index for 1990=357.6

Cost index for 2000=394.1

Cost of tank weighing 450000 kg in 2000=

$\frac {Cost index of 2000×cost of tank weighing45000 kg in 1990} {cost index of 1990}$

Cost of tank weighing 45000 kg in 2000;

$=\frac {394.1×\$640000} {357.6}$

Cost of tank weight 450,000 kg in 2000=$705,324.38

Cost of tank weight 300000 kg in 2000;

$Cost of tank weighing 45000 kg in 2000 ×{(\frac{300000 kg}{450000 kg}}) ^{0.93}$

Cost of tank weight 300000 kg in 2000;

=$705,324.38×0.686=$483,852.52

Cost of tank weight 300000 kg in 2000=$483,852.52