Engineering Economic Analysis

Estimating Models 47

Based on her work in Example 2-7, Miriam has been asked to estimate the cost today of a 25.0.0ft2

heat exchange system for the new plant being-analyzed.'She has the following data.

· Her company paid $5.0,.0.0.0for a 10.0.0ft2 heat exchanger 5 years ago.

· Heat exchangers within this range of capacity have a power sizing exponent(x)of .0.55.

·Five years ago the Heat Exchanger Cost Index (HECI) was 13.06;it is 1487 today.

mmJ:imI

Miriam will first use Equation 2-3 to scale up the cost of the 10.0.0ft2 exchanger to one that is

25.0.0ft2 using the .0.55power-sizing exponent.

Cost of 25.0.0ft2 equipment

(

25.0.0ft2 equipment

)

0.55

Cost of 10.0.0ft2 equipment - 1.0.0.0ft2 equipIIlent

(

25.0.0

)

0.55

Cost of 25.0.0ft2 equipment - ~10.0.0 x 5.0, .0.0.0= $82,8.0.0

Miriam knows that the $82,8.0.0reflects only the scaling up of the cost of the 10.0.0ft2 model

to a 25.0.0ft2 model. Now she will use Equation 2-2 and the HECI data to estimate the cost of a

25.0.0ft2 exchanger today. Miriam's cost esti)]late would be:

Equipment cost today _Index value today

Equipment cost 5 years ago- Index Value5 years ago

1487

Equipment cost today =13.06 x $82,8.0.0 '-0..$94,3.0.0

Triangulation

Triangulationis used in engineering surveying. A geographical area is divided into triangles

from which the surveyor is able to map points within that region by using three fixed

points and horizontal angular distances to locate fixed points of interest (e.g., property line

reference points). Since any point can be located with two lines, the third line represents an

extra perspective and check. We will not use trigonometry to arrive at our cost estimates,

but we can utilize the concept of triangulation. We should approach our economic estimate

from different perspectives because such varied perspectives add richness, confidence, and

quality to the estimate.Triangulationin cost estimating might involve using different

sources of data or using different quantitative models to arrive at the value being estimated.

As decision makers we should always seek out varied perspectives.

Improvement and the Learning Curve

One common phenomenon observed, regardless of the task being performed, is that as the

numberof repetitions increases, performance becomes faster and more accurate. This is the