Process Technology & Economics
Assignment-II
1. Describe a procedure to estimate capital investment cost of a petrochemical plant. Give
break of components.
2. The following information applies to E Company on a given date. Determine the current
ratio, cash ratio, and working capital for Company E at the given date.
Long-term debts
Debts due within 1 year
Accounts payable
Machinery and equipment (at cost)
Cash in bank
Prepaid rent
Government bonds
Social security taxes payable
Reserve for depreciation
Reserve for expansion
Inventory
Accounts receivable
$16,000
$1,000
$2,300
$10,000
$3,100
$300
$3,000
$240
$600
$1,200
$1,600
$1,700
3. Prepare a balance sheet applicable at the date when the X Corporation had the following
assets and equities:
Cash
Accounts payable to B Company
Accounts payable to C Corporation
Accounts receivable
Inventories
Mortgage payable
Common stock sold
Machinery and equipment (at present
value)
Furniture and fixtures (at present value)
Government bonds
Surplus
$20,000
$2,000
$8,000
$6,000
$15,000
$5,000
$50,000
$18,000
$5,000
$3,000
$2,000
4. The earnings pattern for two pipeline projects involving the transportation of gas , each
having, an initial investment of $0.5 million, is as shown below. The useful life of
project 1 is 4 years and of project 2, it is 5 years. The projects do not have any scrap
values. Annual depreciation values for Project1 and Project2 are $250000 and $200000
respectively. Determine which project is more profitable based on average R.O.I. (return
on investment). Note that for calculating values of yearly annual investment, the yearly
depreciation must be subtracted out. Also note that average ROI = average annual
income/average investment.
5. Two pumps are being considered for pumping a fluid from a reservoir. Installed cost and
salvage value for the two pumps are as given below. Pump A has a service life of 4 years.
Determine the service life of Pump B at which the two pumps are competitive if the annual
effective interest rate is 15%. Competitiveness refers to the requirement that the installed
cost of the pumps plus the amount that must be invested at the time of installation so that
sufficient interest will be earned over the service life (when added to the salvage value) to
replace the pumps at the original cost.
Installed Cost ($)
Salvage Value ($)
PUMP A
20000
2000
PUMP B
25000
4000
6. A natural gas pipeline transports 120 MMSCFD at load factor of 95%. The capital cost is
estimated at $70 million and the annual operating cost is $6 million. Amortizing the capital at
8% for a project life of 20 years, calculate the cost of the service and transportation tariffs for
this pipeline
7. An existing plant has been operating in such a way that a large amount of heat is being lost in
waste gases. It has been proposed to save money by recovering heat now being lost. Four
different heat exchangers have been designed to recover the heat and all prices. Saving has
been calculated for each of the design is given in the following table. The plant manager wants
at least 16% annual return on initial investment. Which one of the four designs should
recommend to the plant manager?
8. The purchased and installation costs of some pieces of equipment are given as function of
weight rather than capacity. An example of this is the installed costs of large tanks. The
2010 cost for an installed aluminum tank weighing 45,000 kg was $ 640,000 . For a size
range from 90,000 to 450,000 kg, the installed cost weight exponent for aluminum tanks is
0.93. If an aluminum tank weighing 300,000 kg is required, what capital investment is
needed in the year 2020
9. The annual variable production costs for a plant operating at 70 percent capacity are
$280,000. The sum of the annual fixed charges, overhead costs, and general expenses is
$200,000, and may be considered not to change with production rate. The total annual sales
are $560,000, and the product sells for $4/kg. What is the breakeven point in kilograms of
product per year? What are the gross annual profit(depreciation included) and net annual
profit for this plant at 100 percent capacity if the income tax rate is 35 percent of gross
profit?
10. The purchased equipment cost for a plant (Solid-fluid processing plant) which produces
‘X’ is $ 300,000. The plant is to be an addition to an existing plant. The major part of the
building cost will be for indoor construction. The contractor’s fee will be 7 percent of the
direct plant cost. All other costs are close to the average values found for typical chemical
plants. On the basis of this information, estimate the total direct plant cost, the fixed-capital
investment and the total capital investment.
Ratio factors for estimating capital-investment items based on delivered-equipment cost
Values presented are applicable for major process plant additions to an existing site where
the necessary land is available through purchase or present ownership? The values are
based on FCI ranging from under $ 1 million to over $ 20 million
*Buildings (Including services) cost is considered as 18 % of FCI values for Direct
cost segments for multipurpose plants or large additions to existing facilities
ITEM
Purchased Equipment-delivered(Including
Fabricated equipment and process machinery)
Purchased equipment Installation
Instrumentation and controls (Installed)
Piping (installed)
Electrical (installed)
Yard Improvements
Service facilities (installed)
Land (If purchase is required)
Engineering & Supervision
Construction Expenses
Legal Expenses
Contingency
% of Delivery equipment cost solid-fluid processing plant
100
39
26
31
10
12
55
6
32
34
4
37