Question

A company needs a 33 tonnage refrigeration system. Knowing that a 20 tonnage similar refrigeration system only cost $100,000 15 years ago when the approximate cost index was 150, and that the cost index now is 370. The cost-capacity factor for a refrigeration system is 0.53. 1) estimate the required cost for the 33 tonnage refrigeration system in current year. 2) If borrowing the amount of required money is from a bank in current year and the bank interested rate is 6% per year, find the equivalent value (FW) as a single payment payed back to the bank in 15 years.

Answer 1

Ans:

Cost of 20 Tons refrigeration system (15 years ago) : $100,000

Index Fund was : 150

Current Index Fund : 370

Cost capacity factor : 0.53

1.

Estimated cost for 33 tons refrigeration system = $100,000 * (370 / 150) * (1 / 0.53) = $465,409

2.

Estimated cost of payment in 15 years @6% interest : $465,409 * (1.06)^15 = $1,115,380

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