Capital Cost Estimation

Compressor (C-101)
a) Bare module cost for both at process and base conditions

1. Material carbon steel

2. Centrifugal/electric drive
3. Discharge pressure = 275 kPa
4. Efficiency = 65%
5. Molar flow inlet = 394.8 mol/s
6. Design power (shaft) = 1715.85 kW

Design power calculation:

= 1 1 [( 2 ) 1] /
1

Where:
m = 394.8 mol/s
1 = 1 (assume air in ideal gas condition)
R = 8.314 J/mol.K
1 = 293K
1 = 101 kPa
2 = 275 kPa
= 1.3967 (assume)
= 0.2857
= (394.8)(1)(8.314)(293){[(275/101)0.2857 ] 1}/0.2857
= 1115.30 kW

Using a compressor efficiency of 65%:

100
= 1115.30
65
= 1715.85

Referring to Appendix A in Turton, the values of K1, K2, K3 for compressor are as follows:
K1 2.2897
K2 1.3604
K3 -0.1027

10 0 = 1 + 2 10 () + 3 [10 ()]2
10 0 = 2.2897 + 1.360410 (1715.85) 0.1027[10 (1715.85)]2
10 0 = 2.2897 + 4.4002 1.0744
10 0 = 5.6155
0 = 412572.24
 =

The value of is taken from the table A.6 from Turton textbook
= 2.8

2016 2016

=
2001 2001

2016 556.8
=
412572.24 394

2016 = 583046.25
=
= 583046.25(2.8)
= $ , , .

Reactor (R-101 & R-102)

A. Calculation of CPo

Reactor
R-101 & R-102
The reactor is considered as a vertical vessel, with assumed sizing of diameter D=2.17 m, and length
L=4m. Thus, volume is:

D2 2.17 2
V L (4) 14.79m3
4 4
Referring to Appendix A in Turton, the values of K1, K2, K3 for vertical vessel are as follows:
K1 3.4974
K2 0.4485
K3 0.1074

10 0 = 1 + 2 10 () + 3 [10 ()]2
10 0 = 3.4974 + 0.4485 10 (14.79) + 0.1074[10 (14.79)]2
0 = 14761.91

2016 2016

=
2001 2001

2016 556.8
=
14761.91 394

2016 = 20861.50
 B. Calculation of CBM:

In calculation of CBM, the FM and FP are calculated based on the process conditions. For this process, the
reactor is made up of stainless steel material, and operating pressure of 275 kPa. Referring to Section A.3
in Appendix A in Turton, the FM for this vertical vessel with MOC of stainless steel (SS) is 3.1,
identification number of 20.

The FP is also calculated, by using the same formula shown above during calculation of FP at standard
pressure. Only this time, the pressure is 275 kPa, which is equivalent to 1.737 barg.

(2.737)2.17
0.00315
2[850 0.6(2.737)]
FP 1.0556
0.0063

The values of B1 and B2 remain the same, thus FBM calculated:

FBM = B1 + B2FMFP
FBM= 2.25+1.82(3.1)(1.0556)=8.21
Thus,
CBM=$20861.50(8.21)= $171,272.93

Heat exchanger (E-101)

A = 840.80 m2
1-2 exchanger, fixed head, stainless steel
Process stream in tubes
Q = 86,900 MJ/h
Design pressure = 300 kPa

a) Bare module cost at process condition

Referring to Appendix A in Turton, the values of K1, K2, K3 for heat exchanger are as follows:
K1 4.3247
K2 -0.3030
K3 0.1634

log10 Cp0 = K1 + K 2 log10 (A) + K 3 [log10 (A)]2

log10 Cp0 = 4.3247 0.3030log10 (840.80) + 0.1634[log10 (840.80)]2
log10 Cp0 = 4.3247 0.8862 + 1.3977
log10 Cp0 = 4.8362
Cp0 = $ 68580.40

2016 2016

=
2001 2001

2016 556.8
=
68580.40 394

2016 = 96,917.68

CBM = FBM = Cp(B1 + B2FMFp)

To find Fp:
log10 FP = C1 + C2 log10(P) + C3 [log10(P)]2

Referring to Table A.2 in Turton, the values of C1, C2, C3 for heat exchanger are as follows:
C1 0
C2 0
C3 0

log10 FP = 0 0 log10(1.987) + 0.[log10(1.987)]2

FP = 1

To find FM:
Based on table A.3, from Turton textbook, No of identification = 2, =1.4

Based on figure A.18 from Turton textbook,

1 =1.63
B2 =1.66

= = Cp(B1 + B2FMFp)
= 96,917.68 ( 1.63 + 1.66 (1.4)1)
= $ , .

Tower (T-101)
Bare module cost for tower:
Equation for Bare Module Cost,
=

2
Volume of tower =
4
( 3.0 )2
= 4
(12)
Volume of the tower= parameter of the tower, A = 84.82m3

Based on equation A1 from appendice A from Turton textbook,

K1 3.4974
K2 0.4485
K3 0.1074
 log10 Cp0 = K1 + K 2 log10 (A) + K 3 [log10 (A)]2
log10 Cp0 = 3.4974 + 0.4485log10 (84.82) + 0.1074[log10 (84.82)]2
log10 Cp0 = 3.4974 + 0.8650 + 0.3994
log10 Cp0 = 4.7618
Cp0 = $ 57,783.00

2016 2016

=
2001 2001

2016 556.8
=
57783.00 394

2016 = 81,658.80

Equation A4 from Turton textbook (Bare Module Factor)

FBM = B1 +B2FMFp

From Table A4 from Turton textbook, B1 = 2.25 B2 = 1.82

FBM = 2.25 + 1.82 FMFp

Design Pressure = 110 kPa (1.1 barg)

( + 1 )
+ 0.00315
2[850 0.6( + 1)]
, =
0.0063
( 1.1 + 1 )3.0
+ 0.00315
2[850 0.6(1.1 + 1)]
, =
0.0063

, = 1.09
From Table A3 from Turton textbook,
Identification number: 20
Figure A18 from Turton textbook,
Fm =3.1
FBM = 2.25 + 1.82 (3.1)(1.09)
FBM= 8.40

Bare module cost (tower)

= (81658.80)(8.40)
=$685,933.92

Bare module cost for trays:

2
Area of tray =
4
( 3)2
Area of tray = 4
Area of tray = parameter of the tray, A =7.0686m2

Base on Table A5 from Turton textbook,

Equation for Bare Module Cost,
=

Base on equation A1 from appendices A in Turton textbook

K1 2.9949
K2 0.4465
K3 0.3961

log10 Cp0 = K1 + K 2 log10 (A) + K 3 [log10 (A)]2

log10 Cp0 = 2.9949 + 0.4465log10 (7.0686) + 0.3961[log10 (7.0686)]2
Cp0 = $ 4570

2016 2016

=
2001 2001

2016 556.8
=
4570 394

2016 = 6458.31

To find quantity Factor,Fq:

log10 Fq =0.4771 +0.08516 log10 N - 0.3473 (log10N)2 when N< 20

N=number of trays= 14
log10 Fq =0.4771 +0.08516 log10 (14) - 0.3473 (log1014)2
Fq= 1.31

Table A.6 from Turton textbook,

Identification number = 61
(Figure A.19 from Turton textbook)
FBM= 1.8
Bare module Cost for tray (CBM)
CBM = (6458.31)(14)(1.31)(1.8)
CBM = $213201.73

Total bare module cost for tray and tower:

CBM (tower + tray) = $685,933.92+ $213201.73
CBM = $899,135.65
Heat exchanger (E-102)
A = 131 m2
1-2 exchanger, floating head, stainless steel
Process stream in shell
Q = 19,150 MJ/h
Design pressure = 4100 kPa

a) Bare module cost at process condition

Referring to Appendix A in Turton, the values of K1, K2, K3 for heat exchanger are as follows:
K1 4.8306
K2 -0.8509
K3 0.3187

log10 Cp0 = K1 + K 2 log10 (A) + K 3 [log10 (A)]2

log10 Cp0 = 4.8306 0.8509log10 (131) + 0.3187[log10 (131)]2
log10 Cp0 = 4.8306 1.8016 + 1.4287
log10 Cp0 = 4.4577
Cp0 = $ 28,687.98

2016 2016

=
2001 2001

2016 556.8
=
28687.98 394

2016 = 40,541.80

CBM = FBM = Cp(B1 + B2FMFp)

To find Fp:
log10 FP = C1 + C2 log10(P) + C3 [log10(P)]2

Referring to Table A.2 in Turton, the values of C1, C2, C3 for heat exchanger are as follows:
C1 0.03881
C2 -0.11272
C3 0.08183

log10 FP = 0.03881 0.11272 log10(41) + 0.08183[log10(41)] 2

FP = 1.17

To find FM:
Based on table A.3, from Turton textbook, No of identification = 2, =1.4

Based on figure A.18 from Turton textbook,

1 =1.63
B2 =1.66

= = Cp(B1 + B2FMFp)
= 40,541.80 ( 1.63 + 1.66 (1.4)1.17)
= $ , .

Vessel (V-101)
Vertical vessel
D = 4.00 m
L = 11.3 m
Carbon steel
Design Pressure= 110 kPa

2
Volume of vessel: = 4
(4.00)2 (11.3)
=
4
= 142 3

Referring to Appendix A in Turton, the values of K1, K2, K3 are as follows:

K1 3.4974
K2 0.4485
K3 0.1074

log10 Cp0 = K1 + K 2 log10 (A) + K 3 [log10 (A)]2

log10 Cp0 = 3.4974 + 0.4485 log10 (142) + 0.1074[log10 (142)]2
log10 Cp0 = 3.4974 + 0.9653 + 0.4975
log10 Cp0 = 4.9602
Cp0 = $ 91,243.09

2016 2016

=
2001 2001

2016 556.8
=
91,243.09 394

2016 = 128,944.55

Bare cost module, CBM = CPFBM = CP( B1 + B2FMFP)

To find FM:
From Table A.3, identification number=18, FM= 1.

To find Fp:
 ( + 1 )
+ 0.00315
2[850 0.6( + 1)]
, =
0.0063
( 1.1 + 1 )4.00
+ 0.00315
2[850 0.6(1.1 + 1)]
, =
0.0063

, = 1.2855

Based on figure A.18 from Turton textbook,

1 =2.25
B2 =1.82

= = Cp(B1 + B2FMFp)
= 128,944.55 ( 2.25 + 1.82 (1.0)1.2855)
= $ , .

Tower (T-102)
Bare module cost for tower:
Equation for Bare Module Cost,
=

2
Volume of tower = 4

( 1.02 )2
= 4
(18.6)
Volume of the tower= parameter of the tower, A = 15.20m3

Based on equation A1 from appendice A from Turton textbook,

K1 3.4974
K2 0.4485
K3 0.1074

log10 Cp0 = K1 + K 2 log10 (A) + K 3 [log10 (A)]2

log10 Cp0 = 3.4974 + 0.4485log10 (15.20) + 0.1074[log10 (15.20)]2
log10 Cp0 = 3.4974 + 0.5301 + 0.1500
log10 Cp0 = 4.1775
Cp0 = $ 15,048.74

2016 2016

=
2001 2001

2016 556.8
=
15048.74 394

2016 = 21,266.84

Equation A4 from Turton textbook (Bare Module Factor)

FBM = B1 +B2FMFp

From Table A4 from Turton textbook, B1 = 2.25 B2 = 1.82

FBM = 2.25 + 1.82 FMFp

Design Pressure = 110 kPa (1.1 barg)

( + 1 )
+ 0.00315
2[850 0.6( + 1)]
, =
0.0063
( 1.1 + 1 )1.02
+ 0.00315
2[850 0.6(1.1 + 1)]
, =
0.0063

, = 0.7 = 1.0
From Table A3 from Turton textbook,
Identification number: 20
Figure A18 from Turton textbook,
Fm =3.1
FBM = 2.25 + 1.82 (3.1)(1.0)
FBM= 7.90

Bare module cost (tower)

= (21266.84)(7.90)
=$168,008.04

Bare module cost for trays:

2
Area of tray = 4
( 1.02 )2
Area of tray =
4
Area of tray = parameter of the tray, A =0.8171 m2

Base on Table A5 from Turton textbook,

Equation for Bare Module Cost,
=

Base on equation A1 from appendices A in Turton textbook

K1 2.9949
K2 0.4465
K3 0.3961
 log10 Cp0 = K1 + K 2 log10 (A) + K 3 [log10 (A)]2
log10 Cp0 = 2.9949 + 0.4465log10 (0.8171) + 0.3961[log10 (0.8171)]2
Cp0 = $ 909.45

2016 2016

=
2001 2001

2016 556.8
=
909.45 394

2016 = 1285.23

To find quantity Factor,Fq:

N=number of trays= 42
Fq= 1.00

Table A.6 from Turton textbook,

Identification number = 61
(Figure A.19 from Turton textbook)
FBM= 1.8
Bare module Cost for tray (CBM)
CBM = (1285.23)(42)(1.00)(1.8)
CBM = $97,163.39

Total bare module cost for tray and tower:

CBM (tower + tray) =$168,008.04+ $97,163.39
CBM = $265,171.43
Grassroots cost calculation:

Main Equipment
No
1 C-101 $ 1,632,529.51
2 R-101 $ 171,272.93
3 E-101 $ 383,212.51
4 T-101 $ 899,135.65
5 E-102 $ 176,319.53
6 V-101 $ 591,805.20
7 R-102 $ 171,272.93
8 T-102 $ 265,171.43
TOTAL $ 4,290,719.69
Table 1 Purchased Cost For Main Equipment

No Other Equipment

1 E-103 $ 63,456.57
2 V-102 $ 32,827.61
3 P-101 $ 17,896.89
TOTAL $ 114,181.07
Table 2 Purchased Cost For Other Equipment

Total bare module cost, CBM (TOTAL) :

CBM (TOTAL) = CBM (MAJOR EQUIPMENT) + CBM (OTHER EQUIPMENT)
CBM (TOTAL) = $ 4,290,719.69+ $ 114,181.07
CBM (TOTAL) = $ 4,404,900.76

Total Module Cost, CTM :

CTM = 1.18 CBM
CTM = 1.18 ($ 4,404,900.76)
CTM =$ 5,197,782.90

Grassroots Cost, CGR :

CGR = CTM + 0.5 CBM (TOTAL)
CGR =$ 5,197,782.90 + 0.5 ($ 4,404,900.76)
CGR = $ 7,400,233.28
Conversion $ into RM:
4.42
$ 7,400,233.28 $1.00

=RM 32,709,031.10

Thus, total fixed capital investment =RM 32,709,031.10

Cost Of Manufacturing:
6.3 Manufacturing cost per year

6.3.1 Cost for utilities, CUT

Utilities are used to help complement the main process stream. Most common utilities
used in industries are electricity, usually for compressors, pumps and drives, cooling water,
saturated steam and boiler feed water (bfw). Each of these utilities has their own cost. Since
calculating the true cost of utilities can be very complicated, this section shows the calculations
for the cost of supply of the utility, or the cost to generate the utility.

number of days operates per year

Stream factor = 365

350
= 365 = 0.96

1. Heat Exchanger Utility Streams

In heat exchangers, cooling water, boiler feed water and saturated steam is used as the
medium for heat transfer from, or to the main process stream. Fired heaters, use fuel gases to
help heat up the main process stream directly. In the production of maleic anhydride from butane
process, a total of three heat exchangers is used. The utility costs for all of these equipments are
calculated in the table below. The formula for calculating cost is:

24hr 365day
Cost Q * Cost utilitystream * ( . )
1day 1year
 Where:

- Q is heat duty of heat exchanger or fired heater in GJ/hr, or flowrate of bfw in kg/hr
- Costutilitystream is the standard cost of the utility stream supply per GJ, or per 1000 kg
for bfw
E-101:
Duty: 86.90 GJ/h
Cost of Cooling Water = $ 0.354/GJ

COST = QtCcw
COST = (86.9)(24)(365)(0.96)(0.354)
COST = $ 258,701.16

E-102:
Duty: 19.15 GJ/h
Cost of Hot Pressurized Stream = $ 17.70/GJ

COST = QtChps
COST = (19.15)(24)(365)(0.96)(17.70)
COST = $ 2,850,476

E-103:
Duty: 3.05 GJ/h
Cost of Cooling Water = $ 0.354/GJ

COST = QtCcw
COST = (3.05)(24)(365)(0.96)(0.354)
COST = $ 9,079.85
Equipment Type of Utility Used Cost of Utility Heat Duty/ Yearly Cost (in
($ per GJ)/ ($ per 1000kg) Flowrate $)
E-101 Cooling Water (cw) 0.354 $ per GJ 86.9 GJ/hr 258,701.16
E-102 Hot Pressurized Steam (hps) 17.70 $ per GJ 19.15 GJ/hr 2,850,476
E-606 Cooling Water (cw) 0.354 $ per GJ 3.05 GJ/hr 9,079.85
of cost $ 3,118,257.01
Table 3 Cost of Heat Exchanger Utility

2. Electricity
In this plant, the electricity is mainly focused on equipments that require work, such as
pumps, compressors and drives. Therefore, the calculation of electricity utility is based on how
much work, or power is required to run those equipments. The table below shows the
calculations of the electric cost for the usage of all pumps, drives and compressors used in the
process. The formula used is based on efficiency:

W 24hr 365day
Cost * Cost Electric * ( . )
1day 1year

Where:

- W is power used by equipment in kW

- is the efficiency of the equipment
- Costelectric is the cost of electric in $ per kWh

C-101:
Duty: 1715.85 kW
From Figure 8.7 Turton 2013, the efficiency of an electric drive is 90%
Cost of electric = 0.06/kWh

Electric power = Pdr = Ouput power/electric drive = 1715.85 kW / 0.90 = 1906.50 kW

COST = QtC = (1906.50 kW) (24 hr) (365 days) (0.96) (0.06)
= 961,974.14
P-101:

Duty: 0.7kW
The efficiency of an electric drive is 86%
Cost of electric = 0.06/kWh

Electric power = Pdr = Ouput power/electric drive = 0.7 kW / 0.86 = 0.81 kW

COST = QtC = (0.81 kW) (24 hr) (365 days) (0.96) (0.06)
= 408.71
Equipment Work, W in kW Cost of Yearly cost
electric ($
per kWh)
C-101 1715.85 961,974.14
P-101 0.7 0.06
408.71
of cost $ 962,382.85
Table 4 Cost of electricity

Therefore, the total utility cost, CUT is the total cost of electric summed up with cost of
heat exchanger.

CUT = 3,118,257.01 + 962,382.85 = $ 4,080,639.86

CUT = $ 4,080,639.86 x (RM 4.42/$ 1.00) = RM 18,036,428.18

Cost of Operating Labor, COL

The technique used to calculate operating labor requirements is based on data obtained from five
chemical companies and correlated by Alkhayat and Gerrard. According to this method, the
operating labor requirement for chemical processing plants is given by equation

NOL= (6.29 + 31.7P2 + 0.23Nnp)0.5

Where:

NOL = number of operators per shift

P = number of processing step involving the handling of particulate solid

Nnp = number of nonparticulate processing steps handling steps includes compression, heating
and cooling, mixing, and reaction

In general, for the processes considered in this text, the value of P is zero and the value of Nnp is
given by,

Nnp =

Equipment type Number of equipment Nnp

Compressor 1 1
Tower 2 2
Reactor 2 2
Heater 0 0
Heat Exchanger 2 2
Vessel 1 -
Pump 2 -

Total 10 7

Table 5 Table of total equipment for Nnp

Hence, when Nnp is equal to 7, the number of operating labor requirement is

NOL = [6.29 + 31.7(0)2 + 0.23(7)]0.5

NOL = 2.81

The value of NOL is the number of operators required to run the process unit per shift. A single
operator works on the average 49 weeks (3 week time off for vacation and sick leave) a year,
five 8-hour shift a week.

Number of operator required for one operator per shift = 49 week/year 5 shift/week

=245 shifts per operator/year

A chemical plant operates 24 hours per day.

Total shifts per year = 365 days/year 3 shift/day

= 1095 operating shifts per year.

The number of operators needed to provide this number of shifts is,

The number of operators = 1095 shift/year 245 shifts per operator/year

= 4.5 operators (for a single shift)

Hence,

The operating labor = NOL 4.5 operators

= 2.81 4.5

= 12.65 13 operators

Labor cost, COL = $ 59,580 13

= $ 774,540/y

COL = $ 774,540 (RM 4.42/$ 1.00)

= RM 3,423,466.80
Cost of Raw Material, CRW

Stream factor = 350/365

= 0.96

From stream table, flow rate Butane = 2000 kg/h (stream 2)

Cost of Butane = $ 0.27/ kg

Yearly cost of Butane = (24)(365)(2000)(0.27)(0.96)

= $ 4,541,184/year

CRM = $ 4,541,184 (RM 4.42/$ 1.00)

= RM 20,072,033.28 / year

Waste Treatment Cost, CWT

CWT = (flow rate for a year) (price)

24 350
Flow rate waste treatment stream = 602.5 x
1 1

3
= 5,061,000 1

3 $ 41
CWT = 5,061,000 1000 3

4.42
= $ 207,501 $1

= RM 917,154.42

6.4 Land cost approximation

Industrial land located at Terengganu currently cost at RM 5.60/ft2. The estimated land size
required for construction of this plant is 1,500 m2.

Land cost = area price

= RM 5.60/ft2 16,146 ft2
= RM 90,417.60
6.5 Working capital calculation

Working capital are 20% of the fixed capital investment (FCI)

Working capital = (0.2) (RM 32,709,031.10)

= RM 6,541,806.22

6.6 Revenue per year and salvage value approximation

Revenue per year is estimated to be $20,000,000.00.

Salvage value is assumed to be zero.

Calculation of Cost Manufacturing

= 0.280 + 2.73 + 1.23( + + )

= 0.28 (RM 32,709,031.10) + 2.73( 3,423,466.80) + 1.23( 18,036,428.18 +

917,154.42 + 20,072,033.28 )

= , , .

= 0.180( 32,709,031.10) + 2.73( 3,423,466.80) + 1.23( 18,036,428.18

+ 917,154.42 + 20,072,033.28)

COMd = RM 63, 235, 197.49

PROFITABILITY ANALYSIS

Economic Information for Profitability Analysis

Cost of Land, L $ 20,456.47

Taxation Rate 25%
Annual Interest Rate 15%
Salvage value 0

Working Capital $ 1,480,046.66

Total fixed capital investment, FCIL $ 7,400,233.28

Cost of manufacturing excluding depreciation $ 14,306,605.77

Allowance (after start up), COMd

Total Module Factor 1.18

Grass Root Factor 0.5

Revenue From Sale $ 20,000,000.00

CRM (Raw Material Cost) $ 4,541,184

CUT (Utilities Cost) $ 4,080,639.86

Cwt (Waste Treatment Cost) $ 207,501

COL (Cost of Operating Labor) $ 774,540

Project Life (after start-up) 15 years

Distribution of Fixed Capital Investment:

End of year one 60%

End of year two 40%

Table 6 Economic Information for Profitability Analysis

Non Discounted Profitability

Year Investment Depreciation, FCIL - Dk R Comd (R-Comd- Non- Cumulative Cash

Dk Dk)(1-t) + Dk Discounted Flow
(K)
Cash Flow

0 (0.020456) 7.400233 - (0.020456) (0.020456)

1 (4.44014) 7.400233 - (4.44014) (4.460596)

2 (2.96009+1.48) 7.400233 - (4.44009) (8.900686)

3 1.057176 6.343057 20 14.306606 4.5343395 4.53434 (4.366346)

4 1.057176 5.285881 20 14.306606 4.5343395 4.53434 0.167994

5 1.057176 4.228705 20 14.306606 4.5343395 4.53434 4.702334

6 1.057176 3.171529 20 14.306606 4.5343395 4.53434 9.236674

7 1.057176 2.114353 20 14.306606 4.5343395 4.53434 13.771014

8 1.057176 1.057176 20 14.306606 4.5343395 4.53434 18.305354

9 1.057176 0 20 14.306606 4.5343395 4.53434 22.839694

10 0 20 14.306606 4.2700455 4.270046 27.10974

11 0 20 14.306606 4.2700455 4.270046 31.379786

 12 0 20 14.306606 4.2700455 4.270046 35.649832

13 0 20 14.306606 4.2700455 4.270046 39.919878

14 0 20 14.306606 4.2700455 4.270046 44.189924

15 0 20 14.306606 4.2700455 4.270046 48.45997

16 0 20 14.306606 4.2700455 4.270046 52.730016

17 0 20 14.306606 4.2700455 4.270046 57.000062

Table 7 Non Discounted Profitability

**Note that: All calculated values are in $million

Land + Working Capital = 0.020456 + 1.48

=-$1.500456 million

4.46059(1.500456) 1
Payback Period : =
4.460596(0.020456) 10

X = 0.33 year

Cumulative Cash Position (CCP) = $57.00006 million

Cumulative Cash Ratio (CCR) =
65.90075
= 8.900686

= 7.4040
 1
Rate of Return On Investment (ROROI) =

65.90074/15 1
= 15
7.400233

= 0.5270 or 52.70%

70

60

50

40
Cash Flow ($million)

CCP = $57
30

20

10

PBP = 0.33 years

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
-10 FCIl = $7.400

-20
Time after project start (years)

Graph 1 Non Discounted Cash Flow

Discounted Profitability
Year Non-Discounted Cash Discounted Cash Cumulative Discounted Cash
, n=0.15
(+)
Flow Flow Flow
(K)

0 (0.020456) 1 -0.020456 -0.02046

1 (4.44014) 0.869565217 -3.860991304 -3.881451304

2 (4.44009) 0.756143667 -3.357345936 -7.23879724

3 14.986829 0.657516232 2.981402153 -4.257395087

4 14.986829 0.571753246 2.592523612 -1.664871475

5 14.986829 0.497176735 2.254368358 0.589496883

6 14.986829 0.432327596 1.960320311 2.549817194

7 14.986829 0.37593704 1.704626358 4.254443552

8 14.986829 0.326901774 1.482283789 5.736727341

9 14.986829 0.284262412 1.288942425 7.025669766

10 14.722535 0.247184706 1.055490066 8.081159832

11 14.722535 0.214943223 0.917817448 8.99897728

12 14.722535 0.18690715 0.798102129 9.797079409

 13 14.722535 0.162527957 0.694001851 10.49108126

14 14.722535 0.141328658 0.603479871 11.09456113

15 14.722535 0.122894485 0.524765105 11.61932624

16 14.722535 0.10686477 0.456317483 12.07564372

17 14.722535 0.092925887 0.396797811 12.47244153

Table 8 Discounted Profitability

**Note that all the values are in $million

Discounted Profitability Criteria

Land + Working Capital = 0.020456 + 1.48/1.152= -$1.1395 million

3.881446(1.1395) 1
Discounted Payback Period = 3.881446(0.020456) = 10

X = 0.29 years

Net Present Value (NPV) = $12.47244153 million


Present Value Ratio (PVR) =

19.71124
= 7.238793

= 2.723

15

10
Discounted cash flow $million

NPV =

DPBP = 0.29
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

-5

-10
Time after project start (years)

Graph 2 Discounted Cash Flow

 Interest or Discount Rate NPV ($ Million)

0% 57.000062

15% 12.472442

30% 2.63263

X 0

45% -0.439770

0.4397700 0.45
DCFROR = 0.4397702.63263 = 0.450.3

X= 0.428 , 42.85%
Comparison Between Non-Discounted and Discounted Profitability:

Non-Discounted Discounted
Non-discounted cash flow does not consider Discounted cash flow represents discounts
the time value of money. Each dollar earned in future cash flows to the present in order to
the future is assumed to have the same value reflect the time value of money. Each of the
as each dollar that was invested many years yearly cash flow is discounted back to time
earlier. zero
The cumulative cash position (CCP) is a solid With 15% interest in discounted cash flow, the
$57.00006 million because there were no net present value (NPV) obtained is
interest or discount rates introduced. The value $12.47244153 million which is much lower
obtained is the worth of the project at the end compared to non-discounted cash flow. The
of its life. action or investment with larger NPV is the
better decision.
Interest rate criterion for non-discounted is Interest rate criterion for discounted cash flow
seen from ROROI, where it compares returns is viewed from DCFROR and the calculated
to costs by calculating a ratio or percentage. DCFROR is to be at 42.85%. The greater the
The ROROI is determined as 52.70%. ROROI DCFROR from its interest rate means, the
essentially compares the magnitude and timing project is profitable as it could be break even.
of investment gains directly with the
magnitude and timing of costs. A high ROROI
means that gains compare favorably to costs.
Table 9 Comparison between Non Discounted and Discounted Profitability