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CH12 Process Engineering Economics - James R. Couper

CH12 Process Engineering Economics - James R. Couper - 12...

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12 Choice Between Alternatives and Replacement Engineers are frequently confronted with making choices among alternative equipment, designs, procedures, plans, and methods. In fact, in our daily lives outside the workplace, we make decisions and often do so on whimsy, failing to apply the techniques that will be discussed in the chapter. Available courses of action may require different amounts of capital and different operating expenses, as well as different incomes. The bottom line is, “Will the course of action selected pay?” Other questions also need to be considered, for example: . Why do it this way? . Why do it now? . Why do it at all? There are some basic concepts that must be considered before an attempt is made to apply mathematical methods for solutions: . Decisions are among alternatives; therefore, it is necessary that alternatives be clearly defined and that the merits of appropriate alternatives be considered. . Decisions should be based on the expected consequences of various alternatives, recognizing that all such consequences will occur in the future : . Before procedures are established for project formulation and evaluation, it is essential to decide whose viewpoint is to be adopted—management, customer, etc.
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. In comparing alternatives, it is essential that consequences be commensurable insofar as possible. In engineering, money units are the only units that meet the requirements. . Only differences among alternatives are relevant in their comparison. . Insofar as practicable, separate decisions should be made separately. Alternatives may be grouped into three broad categories: . Independent alternatives . Mutually exclusive alternatives . Dependent alternatives An independent alternative is not affected by the selection of another alternative. Each proposal is evaluated on its own merit and is approved if it meets the criteria of acceptability by management [1]. Alternatives are mutually exclusive when the selection of one alternative eliminates the opportunity to accept any others. Individual investment opportunities are often linked to other alternatives through legal, administrative, political, or physical plant requirements. The acceptance of one alternative depends on the simultaneous acceptance of one or more related alternatives. Such alternatives are dependent alternatives. Examples of these alternatives are found in environmental control proposals where an alternative depends on government regulations. 12.1 THEORETICAL DISCUSSION 12.1.1 Significant Considerations There are several significant considerations that must be addressed before an economic evaluation between alternatives can be made: 1. Theflowsofmoneytaketheformofexpendituresorincome.Savingsfrom operations are considered as income or as a reduction in expenses.
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