10 years ago, when the relevant cost index was 125, a nuclear centrifuge cost $40,000. The...

Question:

10 years ago, when the relevant cost index was 125, a nuclear centrifuge cost $40,000. The centrifuge had a capacity of separating 1500 gallons of ionized solution per hour. Today, it is desire to build a centrifuge with capacity of 4500 gallons per hour, but the cost index now is 500. Assuming a power-sizing exponent to reflect economies of scale, x, of 0.7, use the proper model to determine the approximate cost of the new reactor.

Relevant cost:

Relevant cost relates to the cost, which is linked with a specific decision of the administration and may vary in the future due to the judgement taken. It helps to remove the irrelevant information from the process of decision making.

Answer and Explanation:

Scaling up cost;

Cost if 4,500 Gallons per hour centrifuge = (4,500 / 1,500) ^ {0.75} $40,000

=> 91,180

Thus, the approximate cost now = 91,180 (500 / 125)

=> 91,180 * 4

=> 3,64,720


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