Page 303 - Chemical engineering design

278
CHEMICAL ENGINEERING
Solution
The cash-flow calculations are summarised in Table 6.8. Sample calculations to illustrate
the methods used are given below.
For year 4
Investment (negative cash flow) D £1.5 ð 10 6
3
Sales income D 100 ð 10 ð 150 D £15.0 ð 10 6
3
Raw material costs D 100 ð 10 ð 90 D £9.0 ð 10 6
Fixed operating costs D £0.4 ð 10 6
3
Variable operating costs D 100 ð 10 ð 10 D £1.0 ð 10 6
Net cash flow D sales income costs investment
D 15.0 10.4 1.5 D 3.1 million pounds
3.1
Discounted cash flow (at 15 per cent) D D £1.77 ð 10 6
1 C 0.15 4

For year 8
Investment nil
3
Sales income D 130 ð 10 ð 150 D £19.5 ð 10 6
3
Raw material costs D 130 ð 10 ð 90 D £11.7 ð 10 6
Fixed operating costs D £0.4 ð 10 6
3
Variable operating costs D 130 ð 10 ð 10 D £1.3 ð 10 6
Net cash flow D 19.5 13.4 D 6.10 million pounds
6.1
DCF D D 1.99
1.15 8

DCFRR
This is found by trial-and-error calculations. The present worth has been calculated at
discount rates of 25, 35 and 37 per cent. From the results shown in Table 6.8 it will
be seen that the rate to give zero present worth will be around 36 per cent. This is the
discounted cash-flow rate of return for the project.

6.11. COMPUTER METHODS FOR COSTING AND PROJECT
EVALUATION
Most large manufacturing and contracting organisations use computer programs to aid
in the preparation of cost estimates and in process evaluation. Many have developed
their own programs, using cost data available from company records to ensure that the
estimates are reliable. Of the packages available commercially, QUESTIMATE, marketed
by the Icarus Corporation, is probably the most widely used.
Costing and economic evaluation programs also form part of some of the commercial
process design packages; such as the ICARUS program which is available from Aspen
Tech, see Chapter 4, Table 4.1.