Question

A chemical plant to produce 5000 barrels per day of Biodiesel was estimated to cost 63...

A chemical plant to produce 5000 barrels per day of Biodiesel was estimated to cost 63 million in 1987. Estimate the cost of a plant with twice this capacity in 2019.

Inflation index factor for 2019 of 9.59

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Answer #1

Since the inflation factor is given, the factor formula needs not to be used here, which is [(1 + inflation rate) ^number of years] = 9.59.

Twice the production = 63 × 2 = 126 million

Required cost = Twice the production × Inflation factor

                        = 126 × 9.59

                        = 1,208.34 million

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