Page 267 - Analysis, Synthesis and Design of Chemical Processes, Third Edition

You borrow $10,000 from a bank to buy a new car and agree to make 36 equal monthly payments of $320
each to repay the loan. Draw the discrete CFD for the investor in this agreement.

The bank is the investor. The discrete CFD for this investment is shown in Figure E9.11.

Figure E9.11 CFD for Car Loan Described in Example 9.11

Notes:
1. There is a break in both the time scale and in the investment at time = 0 (the initial investment).
2. From your point of view, the cash flow diagram would be the mirror image of the one shown.

The cash flow diagram constructed in Example 9.11 is typical of those you will encounter throughout this
text. The investment (negative cash flow) is made early in the project during design and construction
before there is an opportunity for the plant to produce product and generate money to repay the investor.
In Example 9.11, payback was made in a series of equal payments over three years to repay the initial
investment by the bank. In Section 9.5, you will learn how to calculate the interest rate charged by the
bank in this example.

9.4.2 Cumulative Cash Flow Diagram

As the name suggests, the cumulative CFD keeps a running total of the cash flows occurring in a project.
To illustrate how to construct a cumulative CFD, consider Example 9.12, which illustrates the cash flows
associated with the construction and operation of a new chemical plant.

Example 9.12

The yearly cash flows estimated for a project involving the construction and operation of a chemical plant
producing a new product are provided in the discrete CFD in Figure E9.12a. Using this information,
construct a cumulative CFD.

Figure E9.12a Discrete CFD for Chemical Plant Described in Example 9.12