Capital costs, definition

It should be emphasized that capital cost estimates using installation factors are at best crude and at worst highly misleading. When preparing such an estimate, the designer spends most of the time on the equipment costs, which represent typically 20 to 40 percent of the total installed cost. The bulk costs (civil engineering, labor, etc.) are factored costs which lack definition. At best, this type of estimate can be expected to be accurate to 30 percent. 

A low temperature of approach for the network reduces utihties but raises heat-transfer area requirements. Research has shown that for most of the pubhshed problems, utility costs are normally more important than annualized capital costs. For this reason, AI is chosen eady in the network design as part of the first tier of the solution. The temperature of approach, AI, for the network is not necessarily the same as the minimum temperature of approach, AT that should be used for individual exchangers. This difference is significant for industrial problems in which multiple shells may be necessary to exchange the heat requited for a given match (5). The economic choice for AT depends on whether the process environment is heater- or refrigeration-dependent and on the shape of the composite curves, ie, whether approximately parallel or severely pinched. In cmde-oil units, the range of AI is usually 10—20°C. By definition, AT A AT. The best relative value of these temperature differences depends on the particular problem under study. 

Project Control Having made a good estimate of the capital cost and the expected construc tion time, it is essential to introduce an effective system for controlling expenditure of time and money during construction. Good capital-cost control can cut down expenditures even when the definitive estimate is not veiy accurate. It is most important for management to receive early warnings if overruns in expenditure or time are likely to occur. 

The only way to avoid this is by strict analysis of the supply chain from the customer order to final product delivery. Definition of the optimized (theoretical) process and sequential work towards a high service level approach allow the identification of gaps, and of opportunities which might not always be the cheapest (ship versus train versus plane) but could be the most effective way to reduce capital costs and shorten planning scope - an important aspect, especially in volatile customer markets with long production processes on the (chemical) supplier side. As in the case of CIP, this needs clear parameters, KPIs, commitment from all players, and regular tracking. The most important parameters are the lead time for all products, optimal lot sizes, replenishment points, and safety inventories. 

The Canadian Income Tax Act IT-285R2 dated March 31, 1994 gives some general definitions and remarks on depreciation of property and capital cost allowance. Schedule II lists the types of property divided into classes, percentage depreciation and description of the property. Some examples are given in Table 5.4. 

To calculate several of the cost items listed in Table 2.1, requires the depreciable and fixed capital costs. The depreciable capital cost is the capital required for equipment and its installation or modification in the process, and all the facilities required to operate the process. There is some variation in the definition of fixed capital cost. References [1-5], define the fixed capital as consisting of the depreciable capital cost, land cost, and site or land development cost. Woods [10], however, omits land cost and land development cost so that that the fixed capital cost equals the depreciable capital cost. We will adopt the first definition here. For now, assume that we know the depreciable capital cost. We will develop a procedure for its evaluation later. In Example 2.1 estimate the production cost using Table 2.1. 

Capital costs for plants, 186-187 Capital gains taxes, 156-157 Capital investments, 157-158 cost factors in, 166-179 estimation of 158-163, 179-193, 210 types of 157-158 Capital ratio, 191 Capital-iecovery factor, 228 Capital sink, 150-152 Capitahzed costs apphcation of 231-232 definition of 230-231 equations for, 231... 

Initial economic comparison of the dissociation-extraction type process with the chemical-consuming process of caustic wetsh, acidification, euid solvent extraction indicates that the dissociation extraction process, which has lower operating costs but may have higher capital cost for contactors and ctssociated equipment, may be less costly overall. A process optimisation cuid more detciiled economic assessment would have to be made, however, before a definite decision could be made between the two processes. 

Broad brush definition of the task and its probable capital cost, venues and timetable. 

The usual definition of a batch reactor is one in which the only chemical and thermal changes are with respect to time—in other words, the reactor is spatially uniform. We will retain this meaning, and thus the simplified balances from Section 7.3 can be used. Batch reactors are most often used for low production capacities and for short-term productions where the cost of labor and other aspects of the operations are l s than capital cost of new equipment, and a small fraction of the unit cost of the product... 

When capital cost estimates of a definitive investment are required to obtain budget authorization, competitive quotes from vendors have to be requested, as these quotes are the most reliable estimates. 

Be prepared to use the Aspen Icarus Process Evaluator (IPE) system provided by Aspen Technology, Inc. to prepare a more definitive estimate of capital cost. 

Caution is required in the use of the simple cashflow indicators, since they fail to take account of changing general price levels or the cost of capital (discussed in Section 13.4). It is always recommended that the definition of the indicators is quoted for clarity of understanding. 

Elevated Flares See Flares for a general definition. The elevated flare, by the use of steam injection and effective tip design, operates as a smokeless combustion device. Flaring generally is of low luminosity up to about 20 % of maximum flaring load. Steam injection tends to introduce a source of noise to the operation, and a compromise between smoke elimination and noise is usually necessary. When adequately elevated (by means of a stack) this type of flare displays the best dispersion characteristics for malodorous and toxic combustion products. Visual and noise pollution often creates nuisance problems. Capital and operating costs tend to be high, and an appreciable plant area can be rendered unavailable for plant operations and equipment because of excessive radiant heat. 

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