٠١/٣٠/١۴٣٧ PLANT DESIGN AND ECONOMICS (5) Zahra Maghsoud Data Presentation ٢ manufacturer’s plant purchaser’s plant ١
٠١/٣٠/١۴٣٧ METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT The methods vary from a simple single factor to a detailed method using ٣ a code of accounts that involves item-by-item costing. Order of Study Preliminery Definitive Detailed magnitude Turnover Hirsch and Lang Chilton Richardson Ratio Glazier Seven- Peters and Account Hand Guthrie Tenths Rule Timmerhaus code Wroth Holland PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4 ۴ ٢
٠١/٣٠/١۴٣٧ 1-Order-of-Magnitude Estimates ۵ A project scope is essential before preparing an estimate irrespective of the quality of the estimate. At best the accuracy range for these estimates may vary from ± 30% to 50%. 1-Order-of-Magnitude Estimates ۶ 1. Turnover Ratio This is a rapid, simple method for estimating the fixed capital investment but is one of the most inaccurate. The turnover ratio is defined as: ٣
٠١/٣٠/١۴٣٧ 1-Order-of-Magnitude Estimates ٧ 1. Turnover Ratio The annual gross sales figure is the product of the annual production rate and the selling price per unit of production. A basic assumption is that all product made is sold. For a large number of chemical processes operating near ambient conditions, the turnover ratio is near 1.0. These ratios may vary from 0.2 to 5.0. Values less than 1.0 are for large volume, capital-intensive industries and those greater than 1.0 are for processes with a small number of equipment items. A list of turnover ratios is found in Table 4.6. ٨ Example 1. Estimate the fixed capital investment for a 1500 ton/day ammonia plant using the turnover ratio. The current gross selling price of ammonia is $150/ton. The plant will operate at a 95% stream time. ۴
٠١/٣٠/١۴٣٧ 1-Order-of-Magnitude Estimates ٩ 2. Seven-Tenths Rule It has been found that cost-capacity data for process plants may be correlated using a logarithmic plot similar to the 0.6 rule. Remer and Chai have compiled exponents for a variety of processes and most are between 0.6 and 0.8. The use of an average value 0.7 is the name of this method. Table 4.8 contain appropriate data. The equation is 1-Order-of-Magnitude Estimates ١٠ 2. Seven-Tenths Rule A company is considering the manufacture of ethylene oxide as an intermediate for its polymer division. The process to be used is the direct oxidation of ethylene. The company built a similar unit in 1997 that had a rated capacity of 100,000 tons annually for $66,000,000. The projected production of the new facility is to be 150,000 tons annually. Estimate the fixed capital investment in late 2001 dollars to produce the required ethylene oxide. ۵
٠١/٣٠/١۴٣٧ METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT ١١ Order of Study Preliminery Definitive Detailed magnitude Turnover Hirsch and Lang Chilton Richardson Ratio Glazier Seven- Peters and Account Hand Guthrie Tenths Rule Timmerhaus code Wroth Holland PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4 2- Study Estimates ١٢ 1- Lang Method Lang developed a method for obtaining quick estimates of the capital investment based upon information gathered on 14 processing plants of various sizes and types. He recommended that the delivered equipment cost be multiplied by a factor based upon the type of processing plant to obtain the fixed capital investment. ۶
٠١/٣٠/١۴٣٧ 2- Study Estimates ١٣ 1- Lang Method These factors include process equipment, instrumentation and automatic control equipment, piping, insulation, electrical, engineering costs, etc., but do not include a contingency factor. The factors are found in Table 4.9. 2- Study Estimates ١۴ 1- Lang Method A small fluid processing plant is considered for construction adjacent to a larger operating unit at a large plant site. The present delivered equipment costs are as follows: Estimate the fixed capital investment, assuming a 15% contingency factor. ٧
٠١/٣٠/١۴٣٧ 2- Study Estimates 1- Lang Method ١۵ 2- Study Estimates ١۶ 2-Hand Method The Hand method is a refinement of the Lang method for quick estimates. Hand recommended that equipment be grouped by type, such as heat exchangers, pumps, compressors, with an appropriate factor applied to each type for installation. The categories and factors are included in Table 4.10. ٨
٠١/٣٠/١۴٣٧ 2- Study Estimates ١٧ 2-Hand Method The justification for different factors is that not all equipment requires the same amount of foundations, piping, electrical, insulation, etc. for installation. The Hand method does not include a contingency factor, so the user should apply an appropriate figure. 2- Study Estimates ١٨ 3-Wroth Method A more detailed list of equipment installation factors was compiled by Wroth. The Lang and Hand methods start with delivered equipment costs, but the Wroth method begins with purchased costs so delivery charges must included. ٩
٠١/٣٠/١۴٣٧ 2- Study Estimates ١٩ 3-Wroth Method 2- Study Estimates 3-Wroth Method ٢٠ Solve previous Example for the battery-limits fixed capital investment using the Wroth method. Assume that the delivery charges are 5% of the purchased equipment cost. A 15% contingency factor is to be used. Since the Wroth method begins using purchased equipment costs, the delivered equipment costs will have to be converted. ١٠
٠١/٣٠/١۴٣٧ 2- Study Estimates ٢١ The results of the three methods are: The Lang method, in general, has a tendency to produce high figures. Whatever figure is reported to management, there should be a statement about the potential accuracy of these study methods, ± 30% METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT ٢٢ Order of Study Preliminery Definitive Detailed magnitude Turnover Hirsch and Lang Chilton Richardson Ratio Glazier Seven- Peters and Account Hand Guthrie Tenths Rule Timmerhaus code Wroth Holland PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4 ١١
٠١/٣٠/١۴٣٧ 3- Preliminary Estimates ٢٣ 1- Chilton Method Chilton used multiple factors to obtain a battery-limits fixed capital investment. The method is an extension of previously discussed factored methods. Chilton developed this method years ago based upon long experience in chemical process plants. For many years, this was the only method reported in the open literature and as a result became popular. ٢۴ 1- Chilton Method ١٢
٠١/٣٠/١۴٣٧ 3- Preliminary Estimates 1- Chilton Method ٢۵ A small fluid processing plant is to be built at an existing plant site. The delivered equipment costs are: The equipment is to be installed in an outdoor structure. The process is heavily instrumented, and auxiliary services and outside lines are minimal. The process is well defined and is based upon a similar unit built at another company location. Estimate the battery-limits fixed capital investment using the Chilton method. Chilton Method ٢۶ ١٣
٠١/٣٠/١۴٣٧ 3- Preliminary Estimates ٢٧ 2- Peters and Timmerhaus Method This method begins with purchased equipment costs delivered and combines some of the features of the Lang and Chilton methods. A process is classified according to whether it is a solid, solid– fluid, or fluid processing plant like the Lang method, and then 12 factors for direct and indirect costs are applied is in the Chilton method. 3- Preliminary Estimates ٢٨ 2- Peters and Timmerhaus Method ١۴
٠١/٣٠/١۴٣٧ 2- Peters and TimmerhausMethod (Example) ٢٩ 3- Preliminary Estimates ٣٠ 3-Holland Method Holland et al. proposed a method that combine features of the Lang, Chilton, and Peters and Timmerhaus methods. In Table 4.16 equipment installation factors are presented depending upon the type of processing plant beginning with delivered equipment costs. ١۵
٠١/٣٠/١۴٣٧ 3- Preliminary Estimates ٣١ 3-Holland Method METHODS FOR ESTIMATION OF FIXED CAPITAL INVESTMENT ٣٢ Order of Study Preliminery Definitive Detailed magnitude Turnover Hirsch and Lang Chilton Richardson Ratio Glazier Seven- Peters and Account Hand Guthrie Tenths Rule Timmerhaus code Wroth Holland PROCESS ENGINEERING ECONOMICS, Couper J. R., 2003; Chapter 4 ١۶
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