Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 4

Nicole is an engineer on temporary assignment at a refinery operation in Seaside. She has reviewed a cost estimate for $430,000, which covers some new processing equipment for the ethylene line. The equipment itself is estimated at $250,000 with a construction cost factor of 0.30 and an installation cost factor of 0.30. No indirect cost factor is listed, but she knows from other sites that indirect cost is a sizable amount that increases the cost of the line's equipment.
a) If the indirect cost factor should be 0.40, determine whether the current estimate includes a factor comparable to this value b) Determine the cost estimate if the 0.40 indirect cost factor is used.