Page 258 - Analysis, Synthesis and Design of Chemical Processes, Third Edition

had to return to you more dollars ($1150) than you invested ($1000). This bank transaction is an
investment commonly termed as savings. In the reverse situation, termed loan, the bank becomes the
investor. You must produce money during the time of the investment.

Equations (9.1) through (9.3) apply to a single transaction between the investor and the producer that
covers n years and uses simple interest. There are other investment schedules and interest formulations in
practice; these will be covered later in this chapter.

Figure 9.1 illustrates a possible arrangement to provide the funds necessary to build a new chemical plant
such as the one introduced in the narrative in Chapter 1.

Figure 9.1 A Typical Financing Scheme for a Chemical Plant

In this arrangement, a bank invests in a company, which in turn invests in a project to produce a chemical.
There are two agreements in this project (see Figure 9.1).
1. The bank is an investor and the company is the producer.
2. The company is an investor and the project is the producer.

In this illustration, all the money produced in the project is sent to the company. The company pays its
investor, the bank, and draws off the rest as profit. The bank also makes a profit from its investment loan
to the company. The project is the source of money to provide profits to both the company and the bank.
The project converts a low-value, raw chemical into chemicals of higher value. Without the investor, the
plant would not be built, and without the plant, there would be no profits for either the company or the
bank.

Money is a measure of the value of products and services. The value of a chemical material is the price it
can be exchanged for in dollars. Investments may be made in units other than dollars, such as stocks,
bonds, grain, oil, or gold. We will often refer to value, or value added, in describing investments. The
term value is a general one and, in our case, may be assigned a dollar figure for economic calculations.

Figure 9.1 shows that all profits were produced from an operating plant. The role of engineers in our
economy should be clear. This is to ensure efficient production of high-value products, including current
as well as new and improved products.