Each of the above items will be discussed in detail in this chapter. Not
every item in the list appears in every estimate.
Although land is a small part of the total capital investment, it should be included.
Companies will frequently purchase a tract of land for a future plant location and
will allocate a parcel of this land at cost to a project when the project is
authorized. Other companies consider land as a sunk cost and since it is small will
eliminate it from economic evaluation considerations.
Land costs may be obtained by checking with the ﬁrm’s real estate
department (if it has one). Local chambers of commerce or real estate agents may
be able to give information on land costs. In the absence of such data, and for
preliminary estimates only, about 3% of the ﬁxed capital investment may be used
to estimate land costs.
4.2 FIXED CAPITAL INVESTMENT
The ﬁxed capital investment for a plant includes the manufacturing equipment,
piping, ductwork, automatic control equipment, structures, insulation, painting,
Assets per Employee
Mining, crude oil production
Motor vehicles and parts
Forest and paper products
Semiconductors and electronic components
Computers and ofﬁce equipment
Aerospace and defense
Food consumer products
Rubber and plastics
: Compiled from Ref. 1.