PDD_17_Econ6_&_EDM1 - Process Design Decisions(PDD...

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Unformatted text preview: Process Design Decisions (PDD) Prof B V Babu Process Design Decisions Copyright © 2008-2009 B V Babu, BITS-Pilani Copyright © 2008-2009 B V Babu, BITS-Pilani LECTURE - 17 Process Design Decisions (PDD) Prof B V Babu Engineering Economics • Recap • Process Profitability – Methods (ROI, PT, DCFROR, CCF) • Capital Charge Factor (CCF) • Economic Decision Making bjectives Copyright © 2008-2009 B V Babu, BITS-Pilani Copyright © 2008-2009 B V Babu, BITS-Pilani – Objectives – Example : Design of a solvent recovery system • Problem definition • General considerations – Economic Potential – Process Alternatives • Design of Gas Absorber System – Alternatives • Summary Process Design Decisions (PDD) Prof B V Babu Capital Charge Factor (CCF) • We prefer to avoid trial and error calculations (as in DCFROR) in preliminary process designs, and • yet we would like to account for the time value of money in some way in our profitability analysis • To accomplish this goal, we define a capital charge ctor s Copyright © 2008-2009 B V Babu, BITS-Pilani Copyright © 2008-2009 B V Babu, BITS-Pilani factor as • Revenue – Total product cost = CCF(Total investment) • Eliminating, (Revenue – Total product cost) from following DCFROR equation using the above equation: ( ) [ ] ( ) ( ) N i i i + & ¡ ¢ £ ¤ ¥ + +- + ¦ § ¨ © ª « 1 Startup cap work. 1 1 4 Cap Fixed 4 ( ) [ ]( ) [ ] ( ) i i N val Salv cap work 1 1 Deprcn 48 . Cost Prod Tot - Revenue 52 . + +- + + = Process Design Decisions (PDD) Prof B V Babu Capital Charge Factor (CCF) • And using the following substitutions (using cost models) – Total Inv = work cap + startup costs – Salvage val = 0.03 (Fixed cap) – Startup = 0.1 (Fixed cap) – Work cap = 0.15 (Total Inv) = (0.15)(0.13) (Fixed cap) = 0.195 (Fixed cap) Copyright © 2008-2009 B V Babu, BITS-Pilani Copyright © 2008-2009 B V Babu, BITS-Pilani – Depreciation = 0.1 (Fixed cap) • We get following expression (‘fixed cap’ gets cancelled) • Hence, based on these simplified assumptions, we see • CCF = f (DCFROR) = f ( i ), explicit expression ( ) [ ]( ) ( ) [ ] 1 1 676 . 048 . 225 . 1 298 . ) 295 . ( 1 25 . 4- + +- +- + + = N N i i i i i CCF Process Design Decisions (PDD) Prof B V Babu Capital Charge Factor (CCF) • If we let, i = 0.15 and N = 11, then CCF = 0.351 • Whereas, if i = 0.15 and N = 16, then CCF = 0.306 • In preliminary design calculations, for the sake of simplicity – by taking the average of above two values of CCF (usual plant e ranges between 11 and 16 years), we let Copyright © 2008-2009 B V Babu, BITS-Pilani Copyright © 2008-2009 B V Babu, BITS-Pilani life ranges between 11 and 16 years), we let • CCF = 0.33 yr-1 = (1/3) yr-1 • A value of i = 0.15 is the smallest value for a new project • A value of i =0.2 is more realistic for safe projects • For a project with high risk such as in biotechnology – We might let CCF = 1 yr-1 Process Design Decisions (PDD)...
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PDD_17_Econ6_&_EDM1 - Process Design Decisions(PDD...

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