Page 308 - Chemical engineering design

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COSTING AND PROJECT EVALUATION
The capital cost of the CHP plant is estimated to be £3 million pounds (5 million
dollars). Combined heat and power is expected to give net savings of £700,000
($1,150,000) per year. The plant is expected to operate for 10 years after the
completion of construction.
Calculate the cumulative net present worth of the project, at a discount rate of 8
per cent. Also, calculate the discounted cash flow rate of return.
Construction will take two years, and the capital will be paid in two equal incre-
ments, at the end of the first and second year. The savings (income) can be
taken as paid at the end of each year. Production will start on the completion of
construction.