Notes from Chapter 1

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

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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. So,

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Chapter 2 Moving average is average of n things usually for months and is one-step ahead. Two step ahead is two forecasts down instead of one. Eg. The two-step ahead forecast for July is
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## This note was uploaded on 03/06/2011 for the course ISEN 315 taught by Professor Hiram during the Spring '08 term at Texas A&M.

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

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