A rice mill is planning to install a captive power plant. The estimated cost of the equipment required for the plant is ₹6.0 crores. The exact details of other cost components are not known, but the cost factor for installation of accessories is 0.68. The construction cost factor is 0.55 and

Question

A rice mill is planning to install a captive power plant. The estimated cost of the equipment required for the plant is ₹6.0 crores. The exact details of other cost components are not known, but the cost factor for installation of accessories is 0.68. The construction cost factor is 0.55 and indirect cost factor is 0.24. Determine the total plant cost if the indirect cost is applied to (a) the cost of equipment and (b) the total direct cost.

Accepted Answer

(a) Total cost of equipment is ₹6.0 crores. Since both the direct and indirect cost factors are applied to only the equipment, the overall cost factor from Equation (15.6) is h = 1 + 0.68 + 0.55 + 0.24 = 2.47. Thus, the total captive power plant cost estimate [latex]C_{T} = 2.47 imes ₹6.0 = ₹14.82[/latex] crores.

[latex]h = 1 + \sum\limits_{i=1}^{n}{f_{i}}=1+0.68+0.55=2.23[/latex]

(b) Now the total direct cost is calculated first, and Equation (15.7) is used to estimate the total plant cost.

[latex]C_{T} = \left[C_{E}\left(1+\sum\limits_{i=1}^{n}{f_{i}} ight) ight]\left(1+f_{i} ight)[/latex]

[latex]C_{T} =\left\{₹6.0 imes 2.23 ight\} imes \left(1.24 ight) =₹16.59[/latex] crores.

Question 15.5: A rice mill is planning to install a captive power plant. Th...

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