Page 338 - Analysis, Synthesis and Design of Chemical Processes, Third Edition

Monte-Carlo Analysis Using CAPCOST. The CAPCOST program introduced in Chapter 7 includes
spreadsheets for estimating the cash flows of a project and the evaluation of profitability criteria such as
NPV and DCFROR. In addition, a Monte-Carlo simulation has also been included that allows the
following variables to be investigated:

• FCI L
• Price of product
• Working capital
• Income tax rate
• Interest rate
• Raw material price
• Salvage value

By specifying the ranges over which these terms are likely to vary, a Monte-Carlo analysis for a given
problem can be achieved. Distributions of criteria such as NPV and DPBP are automatically given. The
reader should consult the help file on the accompanying CD for a tutorial on the use of this software.

10.8 Profit Margin Analysis

All the techniques that have been discussed in this chapter use the fixed capital cost and the operating
costs in order to evaluate the profitability of a process. Clearly, the accuracy of such predictions will
depend on the accuracy of the estimates for the different costs. When screening alternative processes, it is
sometimes useful to evaluate the difference between the revenue from the sale of products and the cost of
raw materials. This difference is called the profit margin or sometimes just the margin.

(10.11)