Capital investment startup

Consideration of the cash-flow stages in Fig. 9-10 shows the factors that can affecd the (EMIP) and (IRP). if the reqiiired capital investment is increased, it is necessary to increase the rate of income after startup for the (EMIP) to remain the same. In order to have the (EMIP) small, it is necessary to keep the research and development, design, and construction stages short. 

The annual rate of straight-line depreciation of the fixed-capital investment Cfc, from 1,000,000 at startup to a salvage value S, of zero at the end of a productive life s of 10 years, is given hy... 

After installation, the total cost of equipment (direct permanent investment) is 6,557,000. Allowing 18% for the cost of contingencies and contractor fees ( 1,180,300), the total depreciable capital is estimated to be 7,737,000. Ten percent of this is assumed to cover the cost of startup, 773,700, giving a total permanent investment of 8,511,000. Working capital is estimated to cover accounts receivable that is, the sales of 30 days production of wafers (41,800 wafers), assumed to sell for 260/wafer, giving 10,868,000. Together with a 2-day inventory of wafers, valued at the product price, the total working capital is 11,520,000. Hence, the total capital investment is 20,031,000. 

Startup expense is not necessarily included as part of the required investment so it is not presented as a component in the summarizing Table 26 for capital investment at the end of this chapter. In the overall cost analysis, startup expense may be represented as a one-time-only expenditure in the first year of the plant operation or as part of the total capital investment depending on the company policies. 

Working-capital investment The working-capital investment of 200,000 must be supplied at the time of plant startup or at the reference point of zero time. 

The net effect of these differing area investments for the two processes is that the total direct investment for the spray dryer MgO process is about 6 lower ( 72.OM vs. 76.2M) than that for the conventional MgO process. This cost advantage for the spray dryer MgO process is further increased as a result of the premise-derived indirect investments (construction expense, contingency, etc.,) and other capital investments (allowance for startup and modification and interest during construction) even though the cost factors (i.e., percentages) for both processes are identical. 

Other Capital Investment Allowance for startup and modifications Interest during construction Royalties 10,325 16,739... 

Step 5 Obtain the total permanent investment and the total capital investment by the following equations, where a large contingency of 40% is used because of the approximate nature of the capital-cost estimate, and the costs of land, royalties, and plant startup are assumed to add an additional 10%. Working capital is taken as 15% of the total permanent investment. 

For the MCB plant considered in Example 17.11, estimate the working capital and compute the total capital investment if land cost and royalty costs are zero, but the startup cost is taken as 2% of... 

SAQ 8.7 The product value at 100% capadty will now be (total cost of production + 7 to 15% ROD, ie 16.04 to 1654 + 1.12 to 2.48. So the minimum product value will be 17.16 per kg of L-phenylalanine and the maximum product value 19.02 per kg of L-phenylalanine. It is rattier difficult to say whether this fictitious process would survive or could compete. Actual data are absolutely necessary. On the other hand this exercise gives us a better understanding of process economics and can also be used to compare a fermentative process for the production of amino adds with, for example, a chemo-enzymatic process. Calculate the return on investment over a 15 year period for an amino add fermentation, based on the following data and assumptions. Production capadty = 500 tonnes per annum Selling price of product = 50 kg Cost price of product = 24.5 kg 1 Capital = 40 million Taxes = 50%. Assumptions Cost of dealer discount, distribution and freight = 20% total sales Startup costs = 10% of capital Working capital = 25% of net sales Administration plus R and D costs = 12.5% of net sales. 

Expenditures at startup. Any costs that arise at startup time do not have to be factored, but have a present worth equal to their cost. The major investment at this time is the working capital, but there also may be some costs involved with the startup of the plant that would be invested at this time. 

Does not include direct investments in startups by corporations Source National Venture Capital Association, Annual Report 1997... 

Corporate venture funds are venture capital funds financed pardy or entirely by industrial companies. They are ideally managed using the same financial criteria as venture capitalists would apply but, in addition, they have a strong relationship with their industrial investors. The startups funded then benefit from the investors industry knowledge, while the industrial investors not only receive a financial return but also better information from the market to use in external and internal investment decisions. They can provide access to new technologies and allow companies to build an external network by, for example, cooperating with a number of different startups. This has given some corporations access to important deals in return for a relatively small investment. 

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