Page 184 - Plant design and economics for chemical engineers

158 PLANT DESIGN AND ECONOMICS FOR CHEMICAL ENGINEERS

Fixed capital required for construction overhead and for all plant compo-
nents that are not directly related to the process operation is designated as the
nonmanufacturing fixed-capital investment. These plant components include the
land, processing buildings, administrative, and other offices, warehouses, labora-
tories, transportation, shipping, and receiving facilities, utility and waste-dis-
posal facilities, shops, and other permanent parts of the plant. The construction
overhead cost consists of field-office and supervision expenses, home-office
expenses, engineering expenses, miscellaneous construction costs, contractor’s
fees, and contingencies. In some cases, construction overhead is proportioned
between manufacturing and nonmanufacturing fixed-capital investment.

Working Capital
The working capital for an industrial plant consists of the total amount of
money invested in (1) raw materials and supplies carried in stock, (2) finished
products in stock and semifinished products in the process of being manufac-
tured, (3) accounts receivable, (4) cash kept on hand for monthly payment of
operating expenses, such as salaries, wages, and raw-material purchases,
(5) accounts payable, and (6) taxes payable.
The raw-materials inventory included in working capital usually amounts
to a l-month supply of the raw materials valued at delivered prices. Finished
products in stock and semifinished products have a value approximately equal to
the total manufacturing cost for 1 month’s production. Because credit terms
extended to customers are usually based on an allowable 30-day payment
period, the working capital required for accounts receivable ordinarily amounts
to the production cost for 1 month of operation.
The ratio of working capital to total capital investment varies with differ-
ent companies, but most chemical plants use an initial working capital amount-
ing to 10 to 20 percent of the total capital investment. This percentage may
increase to as much as 50 percent or more for companies producing products of
seasonal demand because of the large inventories which must be maintained for
appreciable periods of time.

ESTIMATION OF CAPITAL INVESTMENT
Of the many factors which contribute to poor estimates of capital investments,
the most significant one is usually traceable to sizable omissions of equipment,
services, or auxiliary facilities rather than to gross errors in costing. A check list
of items covering a new facility is an invaluable aid in making a complete
estimation of the fixed-capital investment. Table 1 gives a typical list of these
items.