{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Notes from Chapter 1

Notes from Chapter 1 - Notes from Chapter 1 38 Based on...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Notes from Chapter 1 38. Based on past experience, a chemicals firm estimates that the cost of new capacity additions obeys the law: f(y) = .0205y^.58 y = is measured in tons per year f(y) = in millions of dollars. a = .58 D=Demand is 3,000 tons per year r = rate of 12 percent per year (1). Determine the optimal timing of plant additions and the optimal size of each addition. Find u from a in f(u)=u/((e^u)-1) table Then x = u/r = .75/.12=6.25 years = optimal timing Y=optimal size=xD=6.25*3000=18,750tons (2). What is the cost of each addition? f(y)=.0205(18750)^.58= $6.167million A major oil company is considering the optimal timing for the construction of new refineries. From past experience, each doubling of the size of a refinery at a single location results in an increase in the construction costs of about 85 percent. Furthermore, a plant of size 6,000 barrels per day costs $30 million. a) Find the value of assuming a relationship of the form Since doubling capacity increases cost by 85%, So, a. (3 points) Find the value of assuming a relationship of the form Assume that is in units of barrels per day.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern