Discussion
A plant costing 5 million when the cost index stood at 400 would cost, at an index of 600, about
Answer: B
Correct answer: 7.5 million
\[ 5 \times \frac{600}{400} = 7.5\ \mathrm{million}. \] A cost index carries a historical cost forward to today’s prices, and the ratio is of the new index to the old. Inverting it gives 3.33, which is offered here - the check is that a rising index must give a rising cost.
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