Question

Use a combined cost index and the power-sizing cost estimating model to estimate the current cost of a piece of equipment that has 50% more capacity than a similar piece of equipment that cost $30,000 five years ago. The appropriate power-sizing exponent for this type of equipment is 0.8, and the ratio of the cost indexes (current to 5 years ago) is 1.24. (Note that this is more complex than the previous questions.)

A) $55,800

B) $44,640

C) $29,760

D) $51,454

Answer 1

D). $51,454

Cost = Cost of similar equipment x Ratio of capacity^Power sixing exponent x Ratio of the cost index
= $30,000 x (1.50)^0.8 x 1.24
= $51,454