Department of Chemical Engineering

Indian Institute of Technology – Bombay

CL419 (RKM) Process Economics 2017-2018

MINI PROJECT
(Due on November 03, 2017)
Late submissions are totally prohibited

Important Note: Use any source of information except another person. Please use A4
size white sheets only. Projects submitted on sheets torn from examination answer books
(or examination supplementary sheets) will not be graded.

Part-A Optimum Pipe Diameter and Material Selection

Problem Statement

The desalination unit of a coastal chemical plant needs to install a pumping system to
pump sea water through a line which is 61 m long. The pumping capacity required is to
pump 5.28 m3 of sea water per minute. The power requirement for pumping is given by
the formula P (kW) = 6.89 V3/d5, where V = volumetric flow rate (m3/s) and d is the pipe
diameter (m). We are first interested in determining the optimum pipe diameter using (1)
a mild steel pipe, and (2) a stainless steel pipe if a 20% return on capital is acceptable.
Further, we need to decide between the two options to conclude which material would
finally be specified. Carry out a complete economic analysis of this problem using the
following data which has been made available:

Item Description Mild steel Piping Stainless Steel Piping

Cost of Piping (Rs/m) 8,040 d 0.6 14,700 d 0.6
Length of Service (Years) 4 10
Installation Cost (Rs) 15,00,000 30,00,000
Maintenance Cost (Rs/year) = Purchased Cost = (0.06) Purchased Cost
Cost of Power (Rs/kWh) 5.0 5.0

Part-B Cost for Producing Butadiene Sulfone

(Taken from PLANT DESIGN AND ECONOMICS FOR CHEMICAL ENGINEERS by Peters, Timmerhaus, and West. This economic
analysis constituted a part of 1970 AIChE Student Contest Problem)
Problem Statement

A design has been completed for the production of butadiene sulfone from 1,3-butadiene
and sulfur dioxide. Based on the following results from the completed design and the
basic company requirements as listed, determine what the selling price of the butadiene
sulfone product should be as dollars per pound based on:

(a) The case where the company demands a 20 percent continuous nominal interest rate
of return after taxes on any investment [i.e., discount rate (r) is 20 percent].
(b) The case where the company demands a 20 percent finite effective end-of-year
interest rate of return after taxes on any investment [i.e., discount rate (i) is 20
percent].

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 The total capital investment for the complete plant is $300,000. Production is 4,500
tonne (metric)/year of butadiene sulfone.
 A patent royalty charge of 5 percent of the annual sales value before taxes must be
paid.
 Working capital is 10 percent of the fixed capital investment (or $27,000).
 Special start-up costs for the first year only are 10 percent of the fixed capital
investment.
 The plant operates 330 days/yr (90 percent on-stream factor).
 The income-tax rate for the company is 48 percent of the gross profits.
 Straight-line method is used for calculating depreciation cost.
 Calculation of costs per year gives a total of $758,000 that includes all costs except
those for royalty, income taxes, and start-up in the first year of operation. This
$758,000 includes the annual depreciation cost of $27,000.
 The annual costs and the annual income are considered, by company policy, as end-
of-the-year lump-sum transactions.
 Life period of plant is 10 years.
 Scrap value of plant at the end of economic life is negligible (zero).
 Neglect interest during construction period and value-of-land effects.

NOTE: Rate of return calculations for this company must be based on discounted-cash-
flow procedures to account for the time value of money.

Items for Submission (All items as part of a well-structured PROJECT REPORT).

In addition to problem description, methodology, and analysis details, your report must
also include:

For Part-A
 Complete calculation details and tabulation of all costs for both the materials.
 Economic justification for selection of material of construction

For Part-B
 Complete calculation details and tabulation of all costs for both the cases.
 Cash flow diagrams for life period of plant.

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