(a) Twenty years ago your boss created an index to track costs in your industry. The first year costs were set at $12 per unit (this was the Base Year) of the index. Last year the costs per unit were found to be $90. What number should your boss publish in her index to track industry costs?

(b) On another assignment, your boss in (a) above asks you to estimate the cost of new equipment for a decision she is making. Currently your firm owns an older version of a production machine which cost $10,000 and had a capacity of 2000 units per hour when purchased. The new equipment has a capacity of 1000 units per hour-which matches reduced production needs.

If your company uses an MARR of 8% when evaluating equipment purchases, and the power-sizing exponent for this equipment is 0.28, estimate the cost of the new machine. Note that the index for tracking equipment costs of this type of machine was 126 when the old machine was purchased and is now 160.