Capital investment , estimation

The three general types of cost estimates needed are equipment cost, capital investment cost, and product cost. Equipment cost estimates are needed as part of the capital investment estimate, which indicates the amount of money that is needed to start the venture. Both of these estimates are reflected in the product cost estimate, which is important to both management and marketing groups. 

Capital Investment Cost. The capital investment involved in a proposed project is important because it represents the money that must be raised to get the project started, is used in profitabiUty forecasts, and is reflected in the estimated manufacturing cost of a product. The capital investment is classified herein as fixed capital, working capital, and land cost. Sample capital investment estimate forms provide for separate materials (M) and labor (L) categories, or just combined M L figures. 

It is reported that between 10 and 11 million cars are taken apart every year in North America once the metallic portion has been recovered from the crushing operation, the remainder - representing over 20% of the total mass or 3.5 million tons - must be eliminated. Pyrovac, in collaboration with Universite Laval and under the sponsorship of E.T.P. Technologies, recently undertook a research programme to recover valuable products from this Automobile Shredder Residue. A process flow sheet for a 4000 kg/hr plant is presented, with fixed capital investment estimated to be 5 million US dollars. Details are given. 

Equipment Cost Data The foundation of a fixed capital investment estimate is the equipment cost data. From this information, through the application of lactors or percentages based upon the estimator s experience, the fixed capital investment is developed. 

Figure 6-4 shows the relationship between probable accuracy and quantity and quality of information available for the preparation of these five levels of estimates. The approximate limits of error in this listing are plotted and show an envelope of variability. There feaHarge probability that the actual cost will be more than the estimated cost where information is incomplete or in time of rising-cost trends. For such estimates, the positive spread is likely to be wider than the negative, e.g., +40 and - 20 percent for a study estimate. Table 2 illustrates the wide variation that can occur in the cost of making a capital-investment estimate depending on the type of estimate. 

Results obtained using this procedure have shown high correlation with fixed-capital investment estimates that have been obtained with more detailed techniques. Properly used, these factoring methods can yield quick fixed-capital investment requirements with accuracies sufficient for most economic-evaluation purposes. 

ORGANIZATION FOR PRESENTING CAPITAL INVESTMENT ESTIMATES BY COMPARTMENTALIZATION... 

---