A 4000 gallon storage tank was purchased for 240000 12 years

A 4,000 gallon storage tank was purchased for $240,000 12 years ago. How much would a 12,000 gallon storage tank cost today if the power-sizing exponent were 0.73 and the cost index increased from 150 to 250 over the last 12 years. Express your answer in $ to the nearest $1,000.

Solution

Considering the power sizing exponent, Real storage capacity index = (12,000 / 4,000) / 0.73 = 4.11

So,

Today\'s cost = $240,000 x 4.11 x (250 / 150) = $1,644,000