Profitability Calculations

Example 9 Profitability Calculations Example 8 data are used to demonstrate these calculations. Calculate the following  

Whenever an economic study is prepared, the marketing, capital investment, and operating expense data used are estimates, and therefore a degree of uncertainty exists. Questions arise such as, What if the capital investment is 15 percent greater than the value reported A sensitivity analysis is used to determine the effect of percentage changes in pertinent variables on the profitability of the project. Such an analysis indicates which variables are most susceptible to change and need further study. 

Strauss Plot R. Strauss (Chem. Eng., pp. 112-116, Mar. 25, 1968) developed a sensitivity plot, in Fig. 9-14, in which the ordinate is a measure of profitabihty and the abscissa is the change in a variable greater than (or less than) the value used in the base case. Where the abscissa crosses the ordinate is the result of the base case of NPW, return, annual worth, etc. The slope of a line on this spider plot is the degree of change in profitability resulting from a change in a 

Relative Sensitivity Plot Another type of analysis developed by J. C. Agarwal and I. V. Klumpar (Chem. Eng., pp. 66-72, Sept. 29, 1975) is the relative sensitivity plot. The variables studied are related to those in the base case, and the resulting plot is the relative profitability. 

This analysis allows the user to account for variable interaction that is another level of sophistication. Two terms need clarification— 

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Depreciation The Internal Revenue Service allows a deduction for the exhaustion, wear and tear and normal obsolescence of equipment used in the trade or business. (This topic is treated more fufly later in this section.) Briefly, for manufacturing expense estimates, straight-line depreciation is used, and accelerated methods are employed for cash flow analysis and profitability calculations. 

Cash flow is the amount of funds available to a company to meet current operating expenses. Cash flow may be expressed on a before- or after-tax basis. After-tax cashflow is defined as the net profit (income) after taxes plus depreciation. It is an integral part of the net present worth (NPW) and discounted cash flow profitability calculations. 

The value of the environment has to be an integral part of the equations applied to profitability calculations. The value of the respective aquifer has to be taken into account in economic considerations. This approach will no doubt reveal that cleanly managed enterprises are profitable, and all the rest are in the long run economic disasters. Evaluating the value of the relevant aquifers necessitates delineation of their extent, and this is in the realm of the hydrologist s and hydrochemist s field of study. 

The following profit calculation table is designed to help you in this review. 

Additionally, the water depth of the mining area and the distance to the metallurgic plant should be taken into account in profitability calculations. 

Profit calculated from the optimal policy was 26.5 million per year indicating that various grade methanols made from the three biomass feedstocks can be competitive with those made from conventional sources. The calculation was based on the unit manufacturing cost determined from a 26,200 X 10 /day methanol plant capacity (plant capacity III in Table IV). The study, however, disclosed the fact that the biomass feedstock costs are the dominating factor in the economics of methanol production. It would therefore be interesting to note how the optimum profits vary with feedstock cost. 

Table 5.10 Retailer expected profit calculations for wholesale price agreement when the retailer absorbs risk r = 4, w = 2, c/, = 0.5, c = 0.6, K = 15, optimal service level = 0.5...

Hence, let us develop a suitable objective function that incorporates the required produet eoneentration and minimum reactor volume, which may be used in profitability calculations for the plant. Usefiil information for this example is given as follows ... 

Figure 21.2. Origin of Cost Items for Profitability Calculation (Return on Equity).

The profitability of the DIP column was determined based on the value of separating 1C5 for direct blending to gasoline and nC to be used as feed for the Cs/Cg isomerization unit, less the utility and downstream isomerization unit opportunity costs incurred to do so. Lighter feed eomponents, such as n-butane, were assumed to always be fractionated into the DIP overhead, and components heavier than nCs were assumed to always be found in the DIP bottoms stream. Thus, only the disposition of iCs and nCs components were considered in the profitability calculation. Therefore, the objective function for optimizing the DIP tower is defined as... 

The DIP profitability was first examined for scenarios where the isomerization unit has available capacity. The DIP feed rate and overhead nCs content were varied, and profitability calculated, as shown in Figure 14.10. This analysis showed that the optimum target was around 5% of nCs in the overhead, regardless of the tower feed rate. 

The mathematical formulation of the model consists of the objective function (Eq. 12.1) and constraints (Eq. 12.7-12.13). Equations (12.2-12.6) are auxiliary measures used to the elements of the objective function. The notations used are defined in Table 12.1. The weights wy and wy are used to combine the physical units selection and web service selection criteria in a single objective function. The physical units selection is performed to maximize e-retailer s profit calculated as a difference between revenues R and sourcing cost Ci, delivery cost C2 and fixed cost C3. The web service selection is performed to maximize infrastructure processing efficiency L. 

The interaction sites are often fixed at the position of the nuclei, but it is also possible to include additional sites in the middle of a bond to model the repulsion of the electron cloud [18]. As we tackle larger molecules it may be necessary to combine several atoms in an interaction group. In a recent simulation of a lipid bilayer [19], CH3 and CH2 units are represented as single sites and this idea has been applied to a simple six-site model of benzene [20]. There are complete sets of transferable potential parameters available for aromatic and aliphatic hydrocarbons [21] and for hydrogen-bonded fluids [22]. The William s potentials for hydrocarbons [21] have been used in a simulation of CHi, [23], but the exponential repulsion is most profitably calculated using a table look-up. 

ILLUSTRATIVE EXAMPLE 21.24 Plans are underway to purchase and operate some type of chemical reactor. The company is still undecided as to whether to install a CSTR or a TF unit. The CSTR unit is less expensive to purchase and operate than a comparable tubular system, primarily because of energy costs. However, projected income from the TF unit is higher since it will handle a larger quantity of process liquid and provide a purer product. Based on the economic and financial data given in Table 21.6, select the reactor unit that will yield the higher annual profit. Calculations should be based on an interest rate of 12% and a process lifetime of 12 years for both units. ... 

Period 2 Profit Calculations at Trips Logistics for Fixed Lease Option... 

Period 2 Profit Calculations at Trips Logistics with Flexible Lease Contract Warehouse Space Warehouse Space Profit P D =, p =, 2) = D x... 

Period 1 Profit Calculations at Trips Logistics with Flexible Lease Contract... 

Accordingly, the profit calculation at period t represented in Equation (6.9) incorporates such an issue. To conclude, NPV is computed by means of Eq. (6.10). 

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