Capital investment process evaluation

It is necessary to evaluate the profitability of proposed improvements to a process prior to obtaining approval to inclement changes. For one such process, the capital investment (end of year 0) for the project is 250,000. There is no salvage value. In years 1 and 2, you expect to generate an after-tax revenue from the project of 60,000/yr. In years 3-8, you expect to generate an after-tax revenue of 50,000/yr. Assume that the investments and cash flows are single transactions occurring at the end of the year. Assume an effective annual interest rate of 9%. 

Determination of the actual cost of a hydrogenation process is difficult. Among the factors entering into the determination are catalyst cost, catalyst life, cost of materials, capital investment, actual yield, space-time yield, and purification costs, Considerable data are needed to make an accurate evaluation. 

Although there is quite a strong research effort in both the private and governmental sectors, especially in the United States, no firm plans to construct commercial Fischer-Tropsch plants have been announced. Nevertheless, several coal-conversion pilot plants are in an advanced stage of development, and conceptual designs, together with economic evaluations, have been produced for plants capable of processing 140,000 tons of coal per day (20). Such plants would involve a fixed capital investment of some 2.8 billion (1975 estimate) (2/). 

Generally offshore facilities and major process plants onshore represent considerable capital investment and have a high number of severe hazards associated with them (blowouts, ship collisions, line and vessel ruptures, etc.). They normally cannot be easily evaluated with a simple safety checklist approach. Some level of "quantifiable evaluation" reviews are usually prepared to demonstrate that the risk of these facilities is within public, national, industry and corporate expectations. 

The high capital investment cost of the Asahi process is due to the necessity for large absorbers, evaporators, crystallizers, dryers, rotary kiln crackers and screw decanter separators. The major operating and maintenance costs are electricity, fuel oil, steam and chemicals such as soda ash, EDTA and limestone. The requirement for consumption of large amounts of utilities is associated with the operation principle and design of the Asahi process. According to the economic evaluation, equipment required for N0X and SO2 absorption (such as packed-bed absorbers) accounts for 20% of total direct capital investment for treatment of dithionate ion (such as evaporator, crystallizer, dryer, and cracker) it accounts for about 40% and for treatment of nitrogen-sulfur compounds (such as screw decanter and cracker) it accounts for only 2%. 

The final measure of merit of a given process is the profitability of the business venture required for its implementation. The purpose of the ASPEN Cost Estimation and Economic Evaluation System is to calculate the profitability of the simulated process. This requires calculation of the total required capital investment and the annual operating expenses. 

Example S Estimation of fixed-capital investment with power factor applied to plant-capadty ratio. If the process plant, described in Example 1, was erected in the Dallas area for a fixed-capital investment of 436,000 in 1975, determine what the estimated fixed-capital investment would have been in 1980 for a similar process plant located near Los Angeles with twice the process capacity but with an equal number of process units Use the power-factor method to evaluate the new fixed-capital investment and assume the factors given in Table 20 apply. 

A firm is evaluating two competing projects. The first is a new ( grass roots ) inorganic chemicals plant, while the second is the expansion of a textile fibers facility. The process engineers have estimated the projected annual revenue, total capital investment, and total annual cost (without capital recovery) for each project, as follows ... 

Next, the technical, economic, and financial feasibility of proposed processes must be demonstrated. Unless the project shows considerable promise when matched against other potential projects, it may be abandoned. Any particular coiT5)any will have several projects to invest in but limited financial resources so that only the most promising projects will be continued. The research engineer should estimate the capital investment required and the production cost of the product. No matter how crade or incon jlete the process data may be, the research engineer must estimate the profitability of the process to determine if further process development is economically worth the effort. This analysis will also uncover those areas requiring further research to obtain more information for a more accurate economic evaluation. 

A thorough engineering and economic evaluation of the molten carbonate process was completed by Singmaster and Breyer in 1970, under contract to EPA (8). For the same plant situation, their cost estimates (based on 1970 dollars) were 16.81/kW for the capital investment (not including the Claus plant) and 0.95 mills/kW hr for operating costs without by-product credit. 

It is evident that attention paid in the laboratory to the factors affecting particle size distribution will save on capital investments made for separation equipment and downstream process equipment. Specific cake resistance (a) can be determined in the laboratory over the life of a batch, to evaluate if time in the vessel and surrounding piping system is degrading the product s particle size to the point it impedes filtration, washing and subsequent drying. 

An improved magnesium oxide (MgO) flue gas desulfurization process and its comparative economics are described. Innovations made include the use of a spray dryer, a cyclic hotwater reheater, and a coal-fired fluidized-bed reactor for regeneration of the MgO absorbent. Several technical concerns with the proposed design are addressed, including fly ash and chloride buildup. The economic evaluation shows the process to have a capital investment of about seven percent less than that of a conventional MgO scrubbing process and a 40 percent smaller annual revenue requirement. Finally, a sensitivity analysis is shown relating annual revenue requirements to the byproduct sulfuric acid price credit. 

The economic evaluation of the project should be oriented to profitability analysis, as explained in Chapter 14. The estimation of capital investment and operation costs is necessary, but the figures are only intermediate steps to profitability measures. These should be compared with similar processes, or other industrial projects, on a longer-term vision based on a lifecycle analysis. The economic analysis can be done at best with a spreadsheet. 

To be able to start large-scale industrial production of a new API for generics, evaluation of the patent situation and R D work on the process have to start five to eight ( ) years prior to patent expiration, requiring a significant up-front capital investment. 

In the same manner economical data from the life-cycle chain of a product application or process evaluation may also be calculated and summarized. In the end, this analysis can lead to better decisions with regard to product design, material utilization and capital investment. The rationale behind this assessment tool has been described by Saling et al. and by Landsiedel and Saling. " ... 

This product shape selectivity of the zeolites of adjusting their acidity and pore openings composition of the product mixture according to commercial requirements, than in the case of the classical reaction on AI2O3 [52, 53]. A commercial methylamines plant (approx. 45 000 t/y) based on zeolite-type catalsts has been in operation at Nitto Chemicals since 1984 [54]. SRI-International evaluates, that the Nitto Chemical methylamines process can increase the capacity by about 30 - 50 % and reduce the energy consumption by about 40 - 50 X in existing installations and can require about 30 - 40 % less capital investment in new plants [55]. 

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