Question

A certain index for the cost of purchasing and installing utility boilers is keyed to 1988, where its baseline value was arbitrarily set at 100. Company XYZ installed a 50,000-lb/hour boiler for $525,000 in 2000 when the index had a value of 468. This same company must install another boiler of the same size in 2014. The index in 2014 is 542. What is the approximate cost of the hew boiler?

Answer 1

Approximate cost of new boiler in 2014 = index in 2014 / index in 2000 * cost in 200

= 542 / 468 * 525000

= 1.1581196 * 525000

= 608012.82