Question

Escondida Mine in Chile has been so successful with their Phase IV-A Expansion that they are planning to expand their plant with all new equipment. They are going to start enlarging their plant by purchasing the following equipment:

Equipment	Original Size	Cost of Original Equipment (millions)	Power-Sizing Exponent	New Equipment Size
SAG Mill	50,000 tons	$350	0.80	75,000 tons
Cyclones	7,500 gal	$250	0.22	15,000 gal
Flotation Circuit	3,000 ft3	$300	0.6	12,000 ft3

What would be the cost for Escondida to obtain this equipment –assume that they can trade the old equipment for 15% of its original cost? Assume also that the relative price to purchase the equipment has not changed over time (that is, there has been no inflation in equipment prices).

Answer 1

As given in the problem there is no inflation per unit cost of old setup will be maltiplied by the new required copecity

Then salvege value of old machine will be deducted

Equipment Name	SAG Mill	Cyclones	Fountain cercit
Per Unit cost	7000	33333.33333	100000
	350000000/50000	250000000/7500	300000000/3000
Required Units	75000	15000	12000
New cepecity price	525000000	500000000	1200000000
old capecity traded value	52500000	37500000	45000000
	350000000*15%	250000000*15%	300000000*15%
Cost to be incured	472500000	462500000	1155000000
(new capecity price - old capecity traded value)