Rapid capital cost estimating methods

RAPID CAPITAL COST ESTIMATING METHODS 6.5.1. Historical costs... 

Exponential Methods Rapid capital-cost estimates can be made by using capacity-ratio exponents based on existing cost data of a company or drawn from pubhshed correlations. 

There are several depreciation methods, which are discussed in many economic tercts. Since we want to develop a rapid method of estimating the production cost, we will use the simple linear depreciation method. For this method, divide the difference of the depreciable capital cost and its salvage value by the Ufe of the plant, as shown in Table 2.1. An entire plant or individual equipment has three lives an economic life, a physical life, and a tax life. The economic hfe occurs when a plant becomes obsolete, a physical hfe when a plant becomes too costly to maintain, and a tax life, which is fixed by the government. The plant life is usually ten to twenty years. The depreciable capital cost includes all the costs incurred in building a plant up to the point where the plant is ready to produce, except land and site-development costs. Care must be taken not to include costs that are not depreciable. 

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