Profit chemical plant

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. 

A company has sold bonds to finance a new chemical plant. The bonds are to be redeemed in 4 years for 16,000,000. The plant makes a profit of 2,000,000 per year. All interest and financing charges have been included as outlays. Assume the plant will run for 8 years. What is the rate of return ... 

The chemical plant considered here is capable of producing 0.346 kg/hr of pharmaceutical-containing microparticles. To complete the discussion about economic profitability we need a price for the final product. In Table 8.3-5 we assumed a value of 220 EUR/kg. 

To define the economic performance of a manufacturing venture, an analyst must predict various sources and sinks of money throughout the lifetime of a project. In fact the investors invest a huge amount of money when they begin to build the chemical plant, but they will earn money from sales only when the plant is finished and operating. Owing to inflation and devaluation, future money is different from present money [13,15], Therefore, a future income needs to be discounted to its present value in order to evaluate the expected profitability of a chemical plant. Of course, when dealing with future events, nobody can be absolutely positive about prices, inflation rates, etc. Therefore many assumptions need to be... 

It is possible to define different indexes to understand whether a venture will be profitable [13]. Here we consider the discounted break-even period [14]. This index is defined as the time that must elapse after start-up until the discounted cumulative cash-flow repays the fixed capital investment. The discounted cumulative cash-flow is the sum of expenses and gains sustained or earned in the lifetime of a chemical plant. All these sums of money need to be discounted to their present value. 

The total capital investment for a proposed chemical plant which will produce 1,500,000 worth of goods per year is estimated to be 1 million. It will be necessary to do a considerable amount of research and development work on the project before the final plant can be constructed, and management wishes to estimate the permissible research and development costs. It has been decided that the net profits from the plant should be sufficient to pay off the total capital investment plus all research and development costs in 7 years. A return after taxes of at least 12 percent of sales must be obtained, and 34 percent of the research and development cost is tax-ffee (i.e., income-tax rate for the company is 34 percent of the gross earnings). Under these conditions, what is the total amount the company can afford to pay for research and development ... 

The capitalized-cost profitability concept is useful for comparing alternatives which exist as possible investment choices within a single overall project. For example, if a decision based on profitability analysis were to be made as to whether stainless steel or mild steel should be used in a chemical reactor as one part of a chemical plant, capitalized-cost comparison would be a useful and appropriate approach. This particular case is illustrated in Example 9 of Chap. 7. 

A proposed chemical plant will require a fixed-capital investment of 10 million. It is estimated that the working capital will amount to 25 percent of the total investment, and annual depreciation costs are estimated to be 10 percent of the fixed-capital investment. If the annual profit will be 3 million, determine the standard percent return on the total investment and the minimum payout period. 

The profit from a chemical plant will be the difference between income from sales and the cost to produce the chemicals. An approximate formula might be... 

The profits generated by most chemical plants are subject to taxation. Taxes can have a significant impact on the cash flows from a project. The design engineer needs to have a basic understanding of taxation and tax allowances such as depreciation in order to make an economic evaluation of the project. 

A chemical plant with a fixed capital investment of 100 million generates an annual gross profit of 50 million. Calculate the depreciation charge, taxes paid, and aftertax cash flows for the first 10 years of plant operation using straight-line depreciation over 10 years and using MACRS depreciation with a 7-year recovery period. Assume the plant is built at time zero and begins operation at full rate in year 1. Assume the rate of corporate income tax is 35%, and taxes must be paid based on the previous year s income. 

Plant design is an active part of the total lifetime of all chemical processes. The birth to death sequence of a chemical plant is characterized by the level of detail of the plant description required at each design step. Early death of a proposed process can occur at any step before it has been built and produces a product. Only a small fraction of the initial proposals survive beyond the second step. Design continues as the process is modified to keep the product profitable in the face of all competition. The stages of a process proposal can be described as follows ... 

In recent years, the development and application of MOO techniques in chemical engineering have received wide attention in the hterature. In complex chemical processes, the ability to select optimum operating conditions in the presence of multiple conflicting objectives, given the various economical and environmental constraints, is of paramount importance for the profitability of chemical plants. For this reason, MOO has been applied to many chemical process optimization problems. Excellent reviews on the applications of MOO in chemical engineering have been presented by Bhaskar et al. (2000) and Masuduzzaman and Rangaiah (2008). 

Another source mentions institutional realities that undercut corporate safety goals, such as incentives that promote safety violations in the interest of short-term profitability, shielding upper management from bad news and turnover of management staff. 157 A third says that Many chemical plant disasters have been precipitated by an unplanned change in process, a change in equipment or a change in personnel. 158... 

There is a tendency for laymen to think of chemicals as being only man-made, and to characterize them as toxic, as if every natural chemical was not also toxic at some dose. Even a recent NRC/NAS report (28) states "Advances in classical plant breeding.. . offer some promise for nonchemical pest control in the future. Nonchemical approaches will be encouraged by tolerance revocations if more profitable chemical controls are not available.. .." The report was particularly concerned with some pesticides used on tomatoes. Of course, tomatine, one of the alkaloids in tomatoes, is a chemical too, and was introduced from the new world 400 years ago. It has not been tested in rodent cancer bioassays, is present at 36,000 pg/lOO g tomato, and is orders of magnitude closer to the toxic level than are man-made pesticide residues found on tomatoes. 

Safety and the satisfaction of production specifications are the two principal operational objectives for a chemical plant. Once these are achieved, the next goal is how to make the operation of the plant more profitable. Given the fact that the conditions which affect the operation of the plant do not remain the same, it is clear that we would like to be able to change the operation of the plant (flow rates, pressures, concentrations, temperatures) in such a way that an economic objective (profit) is always maximized. This task is undertaken by the automatic controllers of the plant and its human operators. 

In the previous chapter we have seen how an economic appraisal of a chcsniical process has been made. This was termed a preconstruction economic analysis at the process development level. The cost and profit figures were pre.sented to management with fairly reliable costs on equipment and building requirements. An estimate on site development costs vas included with no specific reference to the exact geographical location of the chemical plant. 

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