{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Notes from Chapter 1

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

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

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.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• 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.

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

• 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.

Dana University of Pennsylvania ‘17, Course Hero Intern

• 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.

Jill Tulane University ‘16, Course Hero Intern