Question

In: Economics

The cost of 15 hp motor 5 years ago was 25000$. Today cost index value is 1810 and 1330 was 5 years ago.

The cost of 15 hp motor 5 years ago was 25000$. Today cost index value is 1810 and 1330 was 5 years ago. If the power-sizing exponent is 0.69 find the following:

1) Calculate the cost of 30 hp motor for 5 years ago.

2) Calculate the cost of 30 hp motor today.

Expert Solution

The cost of 15 hp motor was $ 25000 , 5 years ago

We need find out the cost of 30 hp motor ...5years ago

: 15 hp motor =$25000

For 30 ho motorist means double the no of quantity .

25000/15= 1666.66 fmv or actual cost

Here fmv stands for fair market value

So the cost of 1 ho motor is $1666.66

Therefore 30×1666.66=49999.9 or 50000.

We can round it off with $50000

The cost of 30 hp motor is $50000 we can calculate the estimated cost is 0.69

Then 0.69 ×25000=17250

17250 /15= 1150 similarly

1275 for1 st year

1420 for 2nd year

1585 for 3rd yea

1730 for 4th year

1810 tor 5th year

As the cost index value is 1810 and 1330 for current or present value , and power sizing exponent or estimate cost is 0.69

The cost of inflation is high as comparable to 1666.669

Rahul Sunny answered 2 years ago

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