Cumulative Net Cash Flow

The cumulative display below shows how the supercritical carbon dioxide system provided the best economic solution at the end of the first full year of operation. The net present value of the two systems at a 12% cost of capital was deionized water, 425,000 supercritical CO2, 215,000 economic savings utilizing supercritical CO2 system, 210,000. 

In this analysis, the cost components considered are equipment, consumables, maintenance, labor, support personnel, and administrative costs. The equipment costs include depreciation, moves and rearrangements, floor space, and training. Consumables consider utilities, chemicals, supplies and waste disposal. Maintenance includes maintenance labor, parts, vendor service contracts, vendor training and software. Labor is the cost of operators. Support personnel costs consist of engineering, supervision and contract labor. Administrative costs include insurance, taxes and interest. 

Figwre 7. Normalized annual costs for a 5-year accounting life of the equipment. Comparisonbetweena lo lenesolvent cleaningprocessand atwo-step supercritical fluid cleaning process. 

The initial equipment costs and operating costs for the more conventional processes are higher than for supercritical carbon dioxide. The higher equipment costs are due to the additional parts needed for environmental treatments (i.e., scrubbers, vapor incinerators, etc.) The consumables costs are lower for the supercritical fluid processes due to the closed-loop recycle design of the supercritical fluid system, elimination of water for rinsing and the reduced electricity costs associated with not having to dry the parts. 

For the two cases we studied, supercritical fluid cleaning processes resulted in a lower cost of ownership. This cannot be generalized to all processes, but it does indicate that the overall operational costs of supercritical fluid processes can be competitive with other cleaning processes. 

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Let us consider projects A and B, having net annual cash flows as listed in Table 9-2. Both projects have initial fixed-capital expenditures of 100,000. On the basis of payback period, project A is the more desirable since the fixed-capital expenditure is recovered in 3 years, compared with 5 years for projec t B. However, project B runs for 7 years with a cumulative net cash flow of 110,000. This is obviously more profitable than project A, which runs for only 4 years with a cumulative net cash flow of only 10,000. 

The point F gives the final cumulative net cash flow at the end of the project life. 

A simple graph of net cash flow out of, or in to, the project s account illustrates the way in which the cumulative net cash flow moves over the lifetime of the project, and enables the payback time to be easily seen, as in Figure 3. The payback time may be expressed as less than 3 years , or more precisely, such as 2.4 years or 2 years 5 months. 

The levelized prices of PV electricity and H2 are derived by net present value cash flow analysis. The net present value cash flow method is described in Appendix A.l. A straight tine, ten-year depreciation schedule is applied with an annual depreciation rate of 9% of capital. The levelized PV electricity and H2 prices are derived by choosing PV electricity and H2 prices to generate a revenue level that results in a cumulative, net cash flow stream with a 0 net present value over the thirty-year capital recovery period. The annual net cash flow streams are discounted at the present value of the 6%-discount rate. Investment funds are allocated in year 1 construction occurs in year 2 and H2 cash flow begins in year 3. The modular design of PV electrolysis plants and H2 distribution systems enables the rapid initiation of H2 marketing and cash flow. 

Payback period is widely used when long-term cash flows are difficult to forecast, because no information is required beyond the break-even point. It may be used for preliminary evaluation or as a project screening device for high risk projects in times of uncertainty. Payback period is usually measured as the time from the start of production to recovery of the capital investment. The payback period is the time taken for the cumulative net cash flow from start-up of the plant to equal the depreciable fixed capital investment (Cp - S). It is the value of t that satisfies the equation... 

The cumulative net cash flow after tax is plotted against project life in Fig. A.2. This shows a payback time of almost 7 years from the start of the project. Measurement of the area under the curve to break-even shows just under 42 million years and with a maximum cumulative expenditure of 12 04 million the EMIP is almost 3-5 years. These values would have to be compared with target values set by known successes within the company. 

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