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When an acceptable rate for i and n is substituted, a negative EAOC indicates the investment is acceptable
                    (because a negative cost is the same as a positive savings). Use of EAOC is demonstrated in Example

                    10.14.

                    Example 10.14



                    Repeat Example 10.13 using EAOC in place of NPV.
                          For i = 0.15 and n = 5 the value for (A/P, i, n) = 1/3.352.
                          Equation (10.5) becomes
                          EAOC = PC/3.352 – YS
















                    The best alternative is Option 2 because it has the most negative EAOC.


                    10.7 Evaluation of Risk in Evaluating Profitability





                    In this section, the concept of risk in the evaluation of profitability is introduced, and the techniques to
                    quantify  it  are  illustrated.  Until  now,  it  has  been  assumed  that  the  financial  analysis  is  essentially
                    deterministic—that is, all factors are known with absolute certainty. Recalling discussions in Chapter 7
                    regarding the relative error associated with capital cost estimates, it should not be surprising that many of
                    the costs and parameters used in evaluating the profitability of a chemical process are estimates that are

                    subject to error. In fact, nearly all of these factors are subject to change throughout the life of the chemical
                    plant.  The  question  then  is  not,  “Do  these  parameters  change?”  but  rather,  “By  how  much  do  they
                    change?”  In Table 10.1, due to Humphreys [1], ranges of expected variations for factors that affect the
                    prediction and forecasting of profitability are given. In reviewing the prediction or forecasting of factors
                    affecting the profitability of chemical processes, Humphreys [1] gives the ranges of expected variations
                    shown in Table 10.1.


                    Table 10.1 Range of Variation of Factors Affecting the Profitability of a Chemical Process
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