Question: A developing country is considering building a steel plant in its largest city. The estimated construction costs of this plant in domestic prices are listed

A developing country is considering building a steel plant in its largest city. The estimated construction costs of this plant in domestic prices are listed in the table appearing below.

a. Compute the weighted accounting price ratio for the imported materials that would be used in constructing the plant.

b. Compute the total construction cost of the plant in accounting prices.

Accounting Price for Steel Plant Construction (In Thousands of Dubyas) Cost in Domestic Prices Cost in Accounting Prices Item APR Imported materials CIF Price Taxes and Tariffs Transportation Distribution 500 100 50 20 60 80 90 95 Local Materials 600 Labor Skilled Unskilled 300 800 Capital Costs Equipment Other 250 100 .75 90

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