Annual capital charge

The capital cost can be included in the operating cost as an annual capital charge. There will also be an annual charge for maintenance, based on the capital cost. 

The capital cost of the installation = I600/V and the annual capital charges = (1600iV x 45)/100 = 702/V/year. 

The estimated capital requirements represent an approximate 5% annual inflation of the total price actually paid for the Miami facility. Changes in the amortization period or interest rate can significantly affect annual capital charges. Also note that no direct costs for supervision and overhead are included. 

An annual capital charge of 17% of total equal to a DCF rate of 10% when the above calculation. 

NOTE PRODUCTION COST INCLUDES A 17% ANNUAL CAPITAL CHARGE. OXYGEN IS PURCHASED OVER THE-FENCE AT PRESSURE FOR 32/S TON. 

Estimated fixed costs i.e., operating labor, maintenance, administration, insurance, and capital charge, are shown in Table IV. Except for the capital charge, the fixed costs contribute relatively little to the total hydrogen cost. The annual capital charge used in this analysis is 17% of the total installed plant cost. This is equivalent to a simple before-tax payout of slightly less than six years. 

It is sometimes useful to calculate a total cost of production (TCOP), assuming that a plant generates a specified return on investment. In this case an annual capital charge (ACC) is added to the cash cost of production ... 

Methods for calculating the annual capital charge are discussed in Section 6.7.6. 

An alternative method of comparing the magnitude of a capital investment in current dollars with a revenue stream in the future is to convert the capital cost into a future annual capital charge. 

The annual capital charge ratio is the fraction of the principal that must be paid out each year to fully repay the principal and all accumulated interest over the life of the investment. This is the same formula used for calculating payments on home mortgages and other loans where the principal is amortized over the loan period. 

If the cost of capital is used as the interest rate (see Section 6.6.4), then the annual capital charge ratio can be used to convert the initial capital expense into an annual capital charge, or annualized capital cost, as described in Section 6.2.5. 

Annual capital charge (ACC) = ACCR x total capital cost... 

The annual capital charge can be added to the operating costs to give a total annualized cost (TAC) ... 

Table 6.11. Values of Annual Capital Charge Ratio (ACCR) for Different Interest Rates...

If we also assume engineering costs are 10% of (ISBL + OSBL) capital investment and add 15% of (ISBL + OSBL) capital as contingency, then with a 10-year plant life and a 15% interest rate, the annual capital charge ratio is... 

Equation 6.50 is the basis for the widely used rule of thumb of annualizing capital cost by dividing by three. When this rule of thumb is used, it is important to remember that some, but not all, of the fixed costs have been counted in the annual capital charge. 

With a 12% interest rate and 5-year life, the annual capital charge ratio is... 

From Table 6.5, we can estimate the cost of the type 304 stainless steel exchanger to be 140,000 x 1.3 = 182,000. From Table 6.11 (or equation 6.47), with a 10-year life and 12% interest rate, the annual capital charge ratio is 0.177, so the annualized cost of the stainless steel exchanger is... 

The fixed capital investment is to be annualized over f 0 years at a 15% interest rate. For this interest rate and recovery period, the annual capital charge ratio is 0.199, so the annual capital charge is 0.199 x 361.3 = 71.99 MM/y, or 179.98 /MT of product. As a quick check, we can see that this is roughly 10% of the total cost of production, which is typical for commodity chemical processes. 

Revenue requirement includes 14.7% annual capital charge. ... 

An annual capital charge of 25% of capital cost was specified for any new process plant taken up in the calculation. All costs were calculated in terms of 1976 U.S. dollars. 

The total number of trays is a compromise between the total equipment cost and the total utility cost. The optimum total number of trays and the optimum feed-tray location are determined to minimize TAC. The calculation procedure of Douglas is followed with the annual capital charge factor of 1 /3. The utility costs include the steam and cooling water for the operation of reboiler and condenser. The total operating costs include the utility costs and the entrainer makeup cost. The Aspen Plus simulation results for the three entrainers are summarized in Tables 9.10 to 9.12. 

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