(ii) A heat exchanger is required to purchase for a naphtha cracking unit of a petrochemical industry. CEO of the industry wants to estimate the cost of the heat exchanger. But unfortunately, the supplier does not have the required data. At this point, CEO of the company predicts that, the estimation by using cost index data is most suitable to determine the cost. As a CEO of the company, explain why cost index is useful to calculate cost of the equipment?
(ii) A heat exchanger is required to purchase for a naphtha cracking unit of a petrochemical industry. CEO of the industry wants to estimate the cost of the heat exchanger. But unfortunately, the supplier does not have the required data. At this point, CEO of the company predicts that, the estimation by using cost index data is most suitable to determine the cost. As a CEO of the company, explain why cost index is useful to calculate cost of the equipment?
Introduction to Chemical Engineering Thermodynamics
8th Edition
ISBN:9781259696527
Author:J.M. Smith Termodinamica en ingenieria quimica, Hendrick C Van Ness, Michael Abbott, Mark Swihart
Publisher:J.M. Smith Termodinamica en ingenieria quimica, Hendrick C Van Ness, Michael Abbott, Mark Swihart
Chapter1: Introduction
Section: Chapter Questions
Problem 1.1P
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33- Please I want answer with steps. Many thanks
Expert Solution
Step 1
The reason for the cost index to be useful for the calculation of the cost of the given equipment is to mentioned.
Step 2
The data of the given heat exchanger is not available, thus cost index might be a good estimation.
The cost index is the ratio of the actual value of the equipment for the current year to the value of the equipment to the base year from which it is compared.
The formula for the same is,
C1 and C2 are the cost of the heat exchanger in base year and current year respectively.
CI1 and CI2 are the cost index of the heat exchanger in base year and current year respectively.
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