Spreadsheets economic analysis

Most proprietary spreadsheets have procedures for calculating the cumulative NPW from a listing of the yearly net annual revenue (profit). Spreadsheets are useful tools for economic analysis and project evaluation. 

Most cost-estimating and economic analysis calculations are easily carried out using spreadsheets. Templates are introduced in the examples throughout the chapter. Blank templates are given in Appendix G and in the online material at http //books. elsevier.com/companions. The more sophisticated software that is used in industry for preliminary estimating is discussed in Section 6.3. 

When the values above for nitrous oxide, organic waste, and aqueous waste are entered in the spreadsheet, the mass balance shows 101 MT of product for every 100 MT of feed. This is not perfectly closed but is good enough at this stage in the analysis. The error is most likely in the organic or aqueous waste streams and will have little impact on the economic analysis. This should, of course, be revisited when better process yield data and a converged process simulation are available. 

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. 

The chapter starts by introducing the basic concepts of an economic analysis, as prices, breakdown of the capital and manufacturing costs, profit, as well as the formation of cash flow. Because the time-value of money plays a central role the next section presents some basic elements of financial methods. Two other sections deal with the detailed estimation of capital and operation costs. Simplified equations based on typically cost ratios can be used for quick estimations. These ratios are also helpful for the control of more detailed computations. The chapter ends with a more detailed description of the profitability analysis, both by traditional and modem methods. Note that the methods developed in this chapter can be applied using spreadsheets. 

This section is provided on the CD-ROM that accompanies this book. It shows how to use purchase and installation cost estimates from Aspen IPE and other sources, together with an economics spreadsheet by Holger Nickisch (2003) to estimate profitability measures for the monochlorobenzene separation process, which was introduced in Section 4.4. In Section 16.7, Aspen IPE was used to estimate the total permanent investment for this process. The economics spreadsheet, Profitability Analysis — l.O.xls, is on the CD-ROM that accompanies this book. 

When a programmable calculator or a computer is to be used, the anal54ical method is more convenient, particularly if a spreadsheet is used tBurns and Sung. 19961. The conputer calculations are obviously more convenient if a very large number of stages are required, if a trial-and-error solution is required, or if many cases are to be run to explore the effect of many variables (e.g., for economic analysis). 

World-scale producers use spreadsheet analysis to evaluate the economics of different options over the lifetime of the plant (often 20 years is assumed), taking account of operating, maintenance and capital costs. The chlor-alkali industry also expects the current density (CD) to increase in a manner that is dependent on membrane development. Other important factors expressed by producers about membrane technology choice included component lifetimes and reliability. 

Other financial analyses that provide useful information as one seeks to determine whether the organization should proceed with the project include return on investment (ROI) and break-even (BE) analysis. ROI is the ratio of the net returns from the project divided by the cash outlays for the project. BE analysis seeks to determine how long it will take before the early cost outlays can be recouped. If the ROI is high and the BE point is small (i.e., reached quickly), the project becomes more desirable because cash flow estimates far into the future are much more difficult to forecast accurately. Table 2 is a simple spreadsheet that was used to determine economic feasibility. 

The operating pressures, reflux rates, and numbers of trays are a good basis for comparison of the two sequences. It is preferable, however, to determine the capital and operating costs and to compare the sequences on the basis of profitability. For this purpose. Aspen IPE can be used to estimate the costs, as discussed in Section 16.7, and an economics spreadsheet can be used to carry out the profitability analysis, as discussed in Section 17.8. 

Be able to use Aspen IPE in the Aspen Engineering Suite and an economics spreadsheet to carry out a profitability analysis for a potential process. 

Because the revised Chapter 2, Consequence Analysis, of the CPQRA Guidelines, 2nd Edition represents an important topic in process safety, CCPS decided to publish the material as a separate book. This will make the material on consequence analysis more readily and economically available to a broader audience, which uses incident consequence analysis evaluation tools, but does not use quantitative risk analyses. This book includes all of the material in Chapter 2, Consequence Analysis, of the CPQRA Guidelines, 2nd Edition, re-formatted as a stand alone book. All worked examples and spreadsheet problem solutions are included. All of this material will also be published in the CPQRA Guidelines, 2nd Edition. 

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