Capital cost estimation correlations

Exponential Methods Rapid capital-cost estimates can be made by using capacity-ratio exponents based on existing cost data of a company or drawn from pubhshed correlations. 

Peters and Timmerhaus (Ref. CE9) was the most used book in this category. It explains the ratio method and factored cost method of capital cost estimation. It also contains nomographs and correlations so that many plant equipment items can be costed. There are tables of typical values for costs such as insurance, depreciation and engineering. 

April 1990, pp. 138-175. In the method known as the seven-tenths rule, the cost-capacity data for process plants may be correlated by a logarithmic plot similar to the six-tentlis plot for equipment. Remer and Chai compiled exponents for a variety of processes and found that the exponents ranged from 0.6 to 0.8. When the data are used to obtain a capital cost for a different-size plant, the estimated capital must be for the same process. 

The third grouping is Cost Estimation. These references were of direct use in the capital costing. They provided estimation techniques, typical cost data and useful correlations. The source... 

Cost correlations provide a convenient method of estimating the capital cost of major items of equipment. Correlations are usually provided graphically as plots (log-log coordinates) of capital cost of a particular item versus capacity (e.g. volume, surface area, throughput, or power rating). Even at zero capacity, there is some cost (e.g. overheads) associated with the equipment. The cost (C) increases to infinity (i.e. slope of the curve = I), at which point it is more economic to use multiple units of the same size. For an intermediate capacity (Q) range,... 

The estimated installed capital costs (Table III) were developed using correlated cost information. The capital costs include 10% for contingencies. The location is assumed to be on the U.S. Gulf Coast. 

Capital cost is from a published correlation with heat transfer area [7], which is estimated by assuming suitable heat transfer coefficients and counter-flow factors. 

The capital cost of the process can be estimated based on historic data using the correlation given in Table 6.2. The correlation is based on the plant capacity in MMlb/y, so we need to convert the capacity 400 kMTA is equal to 880 MMlb/y ... 

The fixed capital investment is the cost to build the manufacturing facility. Corresponding to the different levels in the gating process given in Table 16.1 are methods of cost estimation that have different levels of accuracy. Here we describe estimation methods for the conceptual design stages that use process cost correlations (which are usually accurate to 40 to 50%) and the bare module factor method ( 30%). Some estimation methods provide improved accuracy but require vendor quotations detailed estimates of material costs of piping, valves, and insulation and estimates of installation labor hours and the mix of labor rates. Such methods are beyond the scope of this chapter. 

If the equity value is estimated by using the discounted cash flow method, the cost of capital assumes a particular relevance. Conventionally, the cost of capital is estimated through the capital asset pricing model (CAPM) that was introduced by Sharpe (1964) and subsequently improved by Lintner (1965). One of the most important variables is beta. Beta measures the sensitivity of the asset s or company returns to variation in the market or index returns. Therefore, according to CAPM theory, the risk assumed from an investor depends on the covariance (or correlation) between individual assets and market portfolio. Thus, if these singular assets do not have correlation, they will not add risk differently, if the correlation is positive they will add risk on market portfolio. 

Costs should be included with any rules of thumb because costs are such vital information to engineering practice. Therefore, in this book, cost correlations for the FOB cost and factors for estimation of the complete installation of that equipment into a working process are given for each type of equipment. The cost estimates are ball park ideas + 30 %. Here we discuss the correlations, the L+M factors to convert FOB costs into bare module costs, factors to obtain the fixed capital investment costs and finally the capital cost guidelines for the equipment described in the main text, with title captions that are the same as in the main text. 

In order to calculate the CO2 avoidance costs, the capital investment costs are first calculated using a conceptual cost estimation method with an accuracy of 40%. In this method, the main equipment costs are estimated. The costs for blowers, the heat exchanger and the columns have been calculated using correlations reported by Seider et al. [24] and Loh and Lyons [25] and are updated to costs in 2010 using the Chemical Engineering Plant Cost Index (CEPCI). 

The capital cost and operation cost of the entire plant are estimated using the correlation given in Douglas [14] and Reyes and Luyben [8]. Therefore, the total annual cost (TAC) model can be expressed as ... 

Published information for industrial scale supercritical extractions is scarce. The same general design considerations will apply as in the subcritical case, through mass transfer rates and equilibrium loadings can be higher. Capital costs are not so easily estimated since the pressures involved fall outside the cost correlations for some of the units. (Use of manufacturer s quotations is recommended, even in the early stages of costing.)... 

SuperPro Designer estimates equipment cost using built-in cost correlations that are based on data derived from a number of vendors and literature sources. In addition, users have the flexibility to enter their own data and correlations for equipment cost estimation. The fixed capital investment is estimated based on equipment cost using various multipliers, some of which are equipment specific (e.g., installation cost) while others are plant specific (e.g., cost of piping, buildings, etc.). This approach is described in detail in the literatrue [6,142]. The rest of this section provides a summary of the cost analysis results for this example process. Table 15.2 shows the key economic evaluation results for this project. Key assumptions for the economic evaluations include 1) a new production suite will be built and dedicated to the manufacturing of this product 2) the entire direct fixed capital is depreciated linearly over a period of twelve years 3) the project lifetime is 15 years, and 4) 27,000 kg of final product is produced per year. 

Capital costs for each technology are estimated based on design capacity using correlations presented by Peters et al. (2002). 

From an economic point of view, the number of sequential operations necessary to achieve the desired purity of a protein product contributes significantly to the overall cost of the downstream process. This is due to the capital investment and amount of consumables needed for each step as well as the individual time required for each operation. Additionally, the overall yield of the purification is reduced with each additional process step as a result of inherent handling losses of product and/or product activity. It has been estimated that the overall cost of the downstream process is closely correlated with the number of purification steps involved and that cost may account for up to 80% of the final process investment.26... 

The other references in this section all contain useful nomographs and correlations for the estimation of capital and equipment costs. 

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