Question

Find the cost of building a new fabrication plant that will be 33% bigger than a similar plant that cost $8 million to build. The appropriate capacity exponent is 0.90.

Answer 1

Solution:

Let the size of old plant be x

New plant is 33% bigger than the old plant.

So,

Size of the new plant $=x+(0.33 * x)$

= x + 0.33x = 1.33x

Cost of the old plant = $8 million

Capacity exponent = 0.90

Calculate the cost of new plant -

Cost of new plant = Cost of old plant * (Size of new plant/Size of old plant)capacity exponent

Cost of new plant =$=\ 8 \text { million } *(1.33 \mathrm{x} / \mathrm{x})^{0.90}$

Cost of new plant =$\text { S8 million } *(1.33)^{0.90}$ = $10.34 million

Thus,

The cost of building new plant is $10.34 million.