Investment costs estimation

Modulation transfer function (MTF) analyses, 19 222, 264-265 Module factor investment cost estimates, 9 530... 

In order to assess the actual potential of the sulphur-iodine cycle for massive hydrogen production at a competitive cost, CEA has been conducting an important programme on this cycle, ranging from thermodynamic measurements to hydrogen production cost evaluation, with flow sheet optimisation, component sizing and investment cost estimation as intermediate steps. The paper will present the method used, the status of both efficiency and production cost estimations, and discuss perspectives for improvement. 

Further, an overview of the key process steps indicates that the pyrolysis unit is more complex than the pelletisers. The other parts of the complete processes are alike. In the investment cost estimate this is valued by about 100% more for the pyrolysis - which, as commented before, seems a slightly small factor. We have no reason to question the estimate and cannot produce any more reliable data but at least the engineering part should imply a bit larger difference. 

Project evaluation enables the technical and economic feasibility of a chemical process to be assessed using preliminary process design and economic evaluations. Once a process flowsheet is available, these evaluations can be classified into several steps material balance calculations, equipment sizing, equipment cost determination, utilities requirements, investment cost estimation, sales volume forecasting, manufacturing cost estimation, and finally profitability and sensitivity analysis. 

The accuracy of the investment cost estimate depends critically on the level of maturity the process has reached [Jung 1983]. 

Factors that influence a capital investment cost estimate over time are inflation, workforce productivity, and changing construction standards. The combined effects of these factors are reflected in widely published indices. The main indices in use are ... 

Investment, Costs, and Prices for Barley and Malt. Estimated malthouse investment (1993) and costs for a new malthouse with annual capacity of 120,000 t are shown in Table 2. This malthouse is equipped with twelve 1,700-bushel steep tanks, eight 10,000-bushel germination compartments, and two double-deck kilns. The kilns are equipped with standard heat recovery units and indirect heat. 

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. 

The most common approach to fixed cost estimation iavolves the use of a capital recovery factor to give the annual depreciation and return on capital. This factor typically is between 15 and 20% of the total capital investment. Property taxes are taken as 1—5% of the fixed capital and iasurance is assumed to be 1—2% of the fixed capital. If annual depreciation is estimated separately, it is assumed to be about 10% of the fixed capital investment. The annual iaterest expense is sometimes neglected as an expense ia preliminary studies. Some economists even beHeve that iaterest should be treated as a return on capital and not as part of the manufactufing expense. 

Rapid Manufacturing-Cost Estimates Fixed manufacturing costs are a func tion of the fixed-capital investment and are independent of the production rate of the plant. Property taxes or rates depend on location. They may be taken as 2 percent of the fixed-capital cost of the plant in the absence of specific data. The cost of insurance depends on both location and the hazardous nature of the materials handled. This cost is normally of the order of 1 percent of the fixed-capital cost of the plant. 

Types and Accuracy of Estimates Capital-cost estimates may be required for a variety of reasons, among others to enable feasibility studies to be carried out, to enable a manufacturing company to select from alternative investments, to assist in selection from alternative designs, to provide information for planning the appropriation of capital, and to enable a contractor to bid on a new project. It is therefore essential to achieve the greatest accuracy of estimation with a minimum expenditure of time and money. 

Environmental Cost Accounting Project cost estimating principles Return on investment calculations Project cost estimating principles... 

The investment costs should be estimated as accurately as possible. As can be seen in Fig. 16.2, a small difference in investment costs can influence the ranking of two heat recovery systems. 

As for a gate fee, estimates are difficult to give. Costs are dominated by the investment costs, which Akzo estimates at 25 million for a 50,000 tpa plant. There exists a large uncertainty in this estimate. For instance, if the feed also included brominated or fluorinated compounds, extra cleaning steps would be needed which would greatly enhance the investment. It is simply too early to give a good estimate of costs per toime for treatment. 

Cost estimation is a specialised subject and a profession in its own right. The design engineer, however, needs to be able to make quick, rough, cost estimates to decide between alternative designs and for project evaluation. Chemical plants are built to make a profit, and an estimate of the investment required and the cost of production are needed before the profitability of a project can be assessed. 

Expenditures for insecticides alone are not an accurate index of the cost of insect control. Many control practices do not involve the use of chemicals. Where chemicals are used considerable labor is required. To this must be added operation, maintenance, and investment costs of equipment needed to apply them. When these are taken into account the cost of control increases several times. In 1938 Hyslop (2) estimated that the cost of controlling the more important insect pests was 142,927,000. 

Naslund (2001) investigated a combined system with river water as base load and snow cooling as back up, for an industrial application. The cooling need was 1,500 kW at 5 °C and 1,500 kW at 15 °C, continuously. The needed snow amount was 78,800 ton, stored in a 120 x 100 x 3 m3(L x W x H) pond with water tight asphalt bottom. The estimated investment cost was about 950,000 A. 

The total investment cost of the Sundsvall snow cooling plant was about 14.5 MSEK, or 1.59 M . Since this full scale operation plant was made also for experiments, research and demonstration it was difficult to distribute the cost in an appropriate way, e.g. the cost of reconstructions. An estimated cost split up is shown in Table 26 (Larsson, 2005). 

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 represents typically 20 to 40% of the total installed cost. The bulk costs (civil engineering, labor, etc.) are factored costs that lack definition. At best, this type of estimate can be expected to be accurate to 30%. To obtain greater accuracy requires detailed examination of all aspects of the investment. Thus, for example, to estimate the erection cost... 

Capital costs can be estimated by applying installation factors to the purchase costs of individual items of equipment. However, there is considerable uncertainty associated with cost estimates obtained in this way, as equipment costs are typically only 20 to 40% of the total installed costs, with the remainder based on factors. Utility investment, off-site investment and working capital are also needed to complete the capital investment. The capital cost can be annualized by considering it as a loan over a fixed period at a fixed rate of interest. 

There are a number of different ways of estimating the cost of constructing a chemical plant. Some require veiy little information and some require a complete listing of every item, from pipe fittings to storage tanks and electrical sockets to generators. All assume a normal schedule and normal conditions. A normal schedule implies that the contractor and engineers will be allowed to operate in the most efficient way. Any attempt to complete the plant sooner will result in increased investment costs. This is discussed in Chapter 13. 

The possible errors that can result when this method is used blindly can be illustrated by considering the case of ammonia plants. Suppose we recalculate the cost of the plant given in Example 9-3 by using Figure 9-1 (m=0.88). An investment cost of 35,000,000 for 1960 can be obtained from extrapolating that curve. The CEPI in 1960 was 102, so the estimated cost for 1969 is... 

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