All costs for added capacity, newly constructed plants or existing plant expansions must be paid for in the same year as the decision to build or expand is made. The cost of new capacity varies according to the year ordered, scale economies and learning/experience curve effects are allowing the makers of new footwear-making equipment to reduce their prices at the rate of 2.5% annually. The announced price for new footwear production capacity in year 11 is 5 million per 100,000 pair of capacity, but the 2.5% annual declines will result in a cost of only 4.3 million per 100,000 pairs of capacity by year 16. Hence, delaying the decision to add new capacity until it is needed has the advantage of lowering the capital investment in new facilities and equipment. You can always see what the current costs of new capacity will be in any particular year by entering numbers of the desired amount of new capacity and observing the resulting capital outlays shown at the bottom of the decision screen. New production capacity is considered to have a service life of 20 years and capital cost are depreciated on a straight-line basis at the rate of 5% annually.