During a major expansion in 2004, Douwalla’s Import Company developed a new processing line for which the delivered equipment cost was $1.75 million. This year, the board of directors decided to expand into new markets and expects to build the current version of the same line. Estimate the cost if the following factors are applicable: construction cost factor is 0.20, installation cost factor is 0.50, indirect cost factor applied against equipment is 0.25, and the total plant cost index has risen from 2509 to 3713 over the years.
What will be an ideal response?
Apply Equation [15.6]. Monetary units are in $ million
h = 1 + 0.2 + 0.5 + 0.25 = 1.95
CT in 2004: 1.75 (1.95) = $3.41 ($3.41 million)
Update to now with the cost index
CT now: 3.41 (3713/2509) = 3.41(1.48) = $5.05 million
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