Investment yield

Example 5 Comparison of alternative investments by different profitability methods. A company has three alternative investments which are being considered. Because all three investments are for the same type of unit and yield the same service, only one of the investments can be accepted. The risk factors are the same for all three cases. Company policies, based on the current economic situation, dictate that a minimum annual return on the original investment of 15 percent after taxes must be predicted for any unnecessary investment with interest on investment not included as a cost. (This may be assumed to mean that other equally sound investments yielding a 15 percent return after taxes are available.) Company policies also dictate that, where applicable, straight-line depreciation is used and, for time-value of money interpretations, end-of-year cost and profit analysis is used. Land value and prestartup costs can be ignored. 

A more complex exeunple would consider the investment yielding the four-year stream of cash flows illustrated in the discussion on cash flow profiles. What rate of return would equate the — 6000... 

The economic analysis also simulates the impact of the program s transfer element on consumption poverty and predicts that poverty falls by about 2.5 percent using a poverty line of either US 1 or US 2 per day. This is an upper bound of the short-run effect. If households save and invest any of the transfer, or if they reduce the number of hours they work, the immediate poverty impact will be lower. If the investments yield a return, the long-run effects on poverty reduction may be higher (World Bank 2006a). 

Using a before-tax basis, it can be seen that her 100,000 investment yields 16,800/yr. The alternative to buying the new machine is to invest money in a mutual fund that yields 10% per year before tax. At face value, the investment in the new machine looks like a winner. However, take a close look at the cash flows for each case (Table E9.20T... 

Higher levels of investment yields higher revenue to SLC s... 

As Rappaport (1986 55) states, "investments yielding returns greater than the cost of capital will create shareholder value, while those yielding less than the cost of capital will decrease shareholder value."... 

If you were offered 7,130 today, or 10,000 in exactly 5 years time, you should be indifferent to the options, unless you could find an alternative investment opportunity which yielded a guaranteed interest rate better than the bank (in which case you should accept the money today and take the alternative investment opportunity). 

Generally, for most fermentation processes to yield a good quality product at a competitive price, at least six key criteria must be met. (/) Fermentation is a capital intensive business and investment must be minimised. (2) The raw materials should be as cheap as possible. (J) Only the highest yielding strains should be used. (4) Recovery and purification should be as rapid and as simple as possible. (5) Automation should be employed to minimise labor usage. (6) The process must be designed to minimise waste production and efftciendy use all utilities (26,27). 

Hydrochloric acid [7647-01-0], which is formed as by-product from unreacted chloroacetic acid, is fed into an absorption column. After the addition of acid and alcohol is complete, the mixture is heated at reflux for 6—8 h, whereby the intermediate malonic acid ester monoamide is hydroly2ed to a dialkyl malonate. The pure ester is obtained from the mixture of cmde esters by extraction with ben2ene [71-43-2], toluene [108-88-3], or xylene [1330-20-7]. The organic phase is washed with dilute sodium hydroxide [1310-73-2] to remove small amounts of the monoester. The diester is then separated from solvent by distillation at atmospheric pressure, and the malonic ester obtained by redistillation under vacuum as a colorless Hquid with a minimum assay of 99%. The aqueous phase contains considerable amounts of mineral acid and salts and must be treated before being fed to the waste treatment plant. The process is suitable for both the dimethyl and diethyl esters. The yield based on sodium chloroacetate is 75—85%. Various low molecular mass hydrocarbons, some of them partially chlorinated, are formed as by-products. Although a relatively simple plant is sufficient for the reaction itself, a si2eable investment is required for treatment of the wastewater and exhaust gas. 

Paper technology-based nonwoven processes provide the least product versatitity and require a high investment at the outset, but yield outstandingly uniform products at exceptional speeds. Hybrid processes provide combined technological advantages for specific apptications. 

This reaction is the basis for the Fluff detergent process (26). The heat evolved coupled with the hydration of the STP is sufficient to dry the reaction mass to yield a light density laundry detergent. Requiring a low capital investment, the Fluff process has found use in less-industrialized countries. 

After removal of the unreacted ammonia and recovery of hydrogen cyanide, the waste gas is essentially all hydrogen suitable for other chemical use. The advantages of the BMA process are the high ammonia and natural gas yields and the usehil hydrogen waste gas, but the high investment and maintenance for the converter is a decided disadvantage. 

Incremental Criteria. When mutually exclusive ventures having different levels of investment are compared, an attractive concept is that each increment of investment must itself yield a satisfactory return. This concept has led to a variety of incremental approaches for profitabiUty analysis. Because the risk can vary with investment level and cloud the meaning of satisfactory, any incremental approach to multiyear investment analysis should be viewed with caution. 

Activated alumina and phosphoric acid on a suitable support have become the choices for an iadustrial process. Ziac oxide with alumina has also been claimed to be a good catalyst. The actual mechanism of dehydration is not known. In iadustrial production, the ethylene yield is 94 to 99% of the theoretical value depending on the processiag scheme. Traces of aldehyde, acids, higher hydrocarbons, and carbon oxides, as well as water, have to be removed. Fixed-bed processes developed at the beginning of this century have been commercialized in many countries, and small-scale industries are still in operation in Brazil and India. New fluid-bed processes have been developed to reduce the plant investment and operating costs (102,103). Commercially available processes include the Lummus processes (fixed and fluidized-bed processes), Halcon/Scientific Design process, NIKK/JGC process, and the Petrobras process. In all these processes, typical ethylene yield is between 94 and 99%. 

In considering two investments, we shall let option B be a safe investment having a base net present value (NPV)g that is independent of any competition. We shall let option A yield a net present value (NPV) i if no competition exists and (NPV) 9 if competition exists. We shall then let the probabilities of no competition and competition be Pi andp2 respectively. Thenpo must equal (1 —p ). 

Insurance and Ri In the venture-premium method of assessment, risky investments are required to yield a rate of return that adds a premium to the cost of finance. D. F. Rudd and C. C. Watson (The Strategy of Process Engineering, Wiley, New York, 1968, p. 91) consider this relationship ... 

Applying two important tax credits would improve the early years cash flow and shorten the payback period. A 10% investment tax credit and a 10% energy tax credit applied to the incremental capital costs for the expanders yields nearly 1.0 million additional first-year cash... 

A low pressure semi-regenerative unit provides yields that approach those obtained in cyclic Powerforming but with savings in investment. For smaller units and moderate severities, the low pressure semi-regenerative unit would likely be the most attractive alternative if selectivity improvement credits are sufficiently high. 

For aromatics production, similar considerations apply. Maximum yields of xylenes and other heavy aromatics can be obtained in cyclic units, but, again, at somewhat higher investments. The process selection, thus, again requires the balancing of process credits versus debits for the specific application. For light aromatics (benzene-toluene) production, however, the situation tends to favor a... 

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