economics 2 students
TRANSCRIPT
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Capital Cost Estimation
Fall 2007
Chapter 16 Seider
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Capital Cost Estimation
Fixed Capital - Real equipment
Cost more than bare module - Custom
designed for plant Use to design future plant - Inflation
Cost of cost estimation
Cost more than 10% of total plant cost for 5%accuracy - P& ID
Predesign - 20 to 30% accurate - PFD
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Variation of Equipment Cost with Size
(Economy of Scale) Escalation of Cost with Capacity
cost1 = purchase price of equipment
capacity1 = size or capacity in year
cost2 = purchase price of same equipment in sameyear but different capacity, (capacity2)
m = size or capacity exponent
m
capacity
capacity
t
t
1
2
1
2
cos
cos
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Consider Storage Tanks
Find m Two tanks, identical material, different capacities
V- volume
R - radius
The volume of tankVcan be similarly expressed
giving for the volume or capacity ratio
3
11
3
4RV
3
1
2
1
2
R
R
V
V
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Cost is proportional toA not V
Area ratio
At a selling price ofCs ($ per m2) the
purchase cost would be:
2
11 4 RA
2
1
2
1
2
R
R
A
A
sCRCost2
224
sCRCost2
114
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Or
Replacing the radius ratio with the capacityratio:
Substituting forR2/R1:
In the tank case m = 2/3
2
coscos
1
2
12
R
Rtt
3
1
2
1
2
1
2
R
R
capacity
capacity
V
V
3/2
12 1
2
capacity
capacity
CostCost
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Exponents for Equipment Cost
vs. Capacity Economy of scale
One large less costly than many small
Exceptions
Furnace stack - proportional to height
Crushers - larger is more costly
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Six-tenths Rule Guthrie - correlated 59 processes m = 0.38 to 0.9
with average = 0.64
Limitations
Need to know capital costs of one plant of a givencapacity
No allowance for new technology
Advantages
Rapid order of magnitude
Log-log plots of cost vs capacity
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Inflation
Corrective data needed to adjust older datato current or future trends.
Factor:
Ib - index of inflation at a base cost
I- index of inflation
b
m
b I
I
capacity
capacityCost
I
ICostCost
1
2
112
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Indicespg 483-485
Engineering News Recordindex - general
Nelson-Farrar index - petroleum
Marshal and Swift Equipment Cost Index
Published monthly in Chemical Engineering
Chemical Engineering Based on chemical plant equipment
Improvements in productivity accounted for
Engineering costs, materials, manufacturing, andinstallation included
Published monthly in Chemical Engineering
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Capital Investment Costs
Total Capital Investment
One time expense for the design, construction,
and start up of a new plant or a revamp of anexisting plant.
CTCI
Goal of Lecture is to Determine This
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Addition to Existing Plant vs.
Grass Roots Integrated Complex
Add onto existing plant
Add polyethylene production to ethylene productionplant
May need auxiliary facilities
Grass Roots
No other Chemical plants nearby
Need cafeteria, auxiliary facilities etc.
Need to determine if utilities will be purchased orplants built
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Bare Module Equipment Cost,
CBM Cost of installed equipment for integrated
complex or for grass roots
Purchase price is significantly different thanthe installed cost.
Factors to estimate how much it costs to
have an installed piece of equipment basedon the type of equipment
Costs are added to the purchase price, CP
Result is the Bare Module Cost, CBM.
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Determining CBM
Start with Purchase Price, CP Add Direct Expensesequipment specific
CM
material costs (concrete, piping,controllers, electrical, insulation, paint)
CLlabor costs to install
Add Indirect Expenses, CIEFreight, insurance and taxes CFITConstruction overhead CO
Contractor engineering CE
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Example ofCBM
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Determining CBM
Typically determine CFIT, CL, CM, etc asfractions ofCP.
CL = 0.63 CPfor heat exchanger Total CBM(Bare Module Cost)
CBM= FBMCPF
BM
bare module factorTable 16.11
Sum of all of the factors forCFIT, CL, CM, etc
Typical
Method for
ClassUse
FBM
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Estimation of Total Capital
Investment From Bare module cost to total cost
Three methods in text
Hillorder of magnitudeMethod 1
Langbased on type of plantMethod 2
GuthrieWe will useMethod 3
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Lang Factors
Purchase cost * 1.05 * Lang factor
1.05 is for delivery
Lang factor - nature of process
Solids (cement plant) 3.9
Solid and fluid (fertilizer) 4.1
Fluid processing (oil refinery) 4.6
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Components of Total Capital
Investment, CTCI Total bare module, CTBM
CFEtotal bare module fabricated equipment
(heat exchanger, distillation column, vessel)
CPMtotal bare module process machinery
(pumps, compressor, centrifuge)
Csparetotal bare module for sparesCstoragetotal bare modules for storage
Ccatalystcost for initial catalyst
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Other Investment Costs
Usually calculated as fractions ofCTBM Csitecost of site preparation
= (0.10- 0.20) CTBMfor grass roots
= (0.040.06) CTBM
for integrated complex
Cbuildingsprocess buildings= (0.1) CTBMfor housed or inside
Coffsite = Cserv + Calloc
Cserv = (0.05) CTBM for integrated complexCserv = (0.2) CTBMfor grass roots
Calloc- Table 16.12
Sum of all of these is the CDPIDirect permanent
investment (CTBM+ Cbuildings +Coffsite)
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Other Investment Costs cont.
Ccontcontingencies and contractors fee= 0.15 (CDPI)contingency
= 0.03(CDPI)contractor
CTDCtotal depreciable capital = CDPI+ Ccont
Clandcost of land = 0.02(CTDC)
Croyalroyalties for patents= 0.02 (CTDC)
Annual fee of 3% of product sales
Cstartupstartup costs = 0.1(CTDC)
CTPI= CTDC+ Cland+Croyal+Cstartup Total permanentinvestment
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Adjusting CTPIfor Location
Cheaper to build in some places relative to
others
FISFinvestment site factors
Table 16.13 gives investment factors for
different sites (Gulf Coast vs India vs
Midwest)
TPIISFTPI CFC corrected
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Total Capital Investment, CTCI
CWCworking capital
$ invested to get the plant into productive operation
1 month raw materials, extra catalyst
2 month product inventory
10 - 20% fixed capital
CTCI= CTPI+ CWC
Guthrie methodCTCI= CTPI+ CWC= 1.18(CTBM+Csite+Cbuildings+Coffsite) + CWC
Neglects land, royalties, and plant startup
Total Bare Module Cost for onsite CFE +
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Total Bare Module Cost for onsite
equipment
CFE +
CPM
Total Bare Module Cost for Spare Cspare
Total Bare Module Cost for Storage
and Surge Tanks
Cstorage
Total Initial Cost for Catalyst Ccatalys
Total bare module investment, TBM CTBM
Cost of buildings Cbuild
Cost of site preparation Csite
Cost of service facilities Cserv
Allocated cost for utility plants and
related facilities
Calloc
***
Total Direct Permanent invest, DPI CDPI
Contingencies and contractors fee Ccont
Total depreciable capital, TDC CTDC
Cost of land Cland
Cost of royalties Croyal
Cost of plant startup Cstart
Total Permanent investment CTPI
Adjusted Total Permanent
investment
CTPIa
Working Capital CWC
TOTAL CAPITAL INVESTMENT CTCI