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Capital Investment
Dr. K. Shahzad Baig
Memorial University of Newfoundland (MUN) Canada
Capital Cost Estimate Classifications
Order of magnitude
Toluene + Hydrogen Benzene
Detailed Process Diagram
Study Estimate
Detailed PID Diagram
Definitive Estimates
The turnover ratio is
the percentage of a mutual fund or other investment's holdings that have been replaced in a
given year, which varies by the type of mutual fund, its investment objective and/or the
portfolio manager's investing style.
𝑇𝑢𝑟𝑛 𝑂𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 𝑇𝑂𝑅 =
𝐴𝑛𝑛𝑢𝑎𝑙 𝑔𝑟𝑜𝑠𝑠 𝑠𝑎𝑙𝑒𝑠
𝐹𝑖𝑥𝑒𝑑 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
Turnover ratio
The TOR for ammonia plant is 0.65
Problem Statement
Estimate the fixed capital
investment of a 75000 ton/yr
maleic anhydride plant using
the data for fixed investment
per per annual ton capacity
in the table
Maleic anhydride plant is $270 investment per annual
ton/ capacity
The fixed capital investment of a plant is 75000 ton/yr
X $ 270 /annual ton
= $20,300,000
Problem 3
Problem Statement
Lang method
Battery limits encompasses the manufacturing area, all process equipment but excluding
provision of storage, utilities, administrative building, auxiliary facilities unless specified.
Usually it it excludes site preparation. Therefore, it may be applied to the extension of a plant
Hand method
Solve Problem 1 for the battery limit fixed capital investment by using Hand
method and contingency of 15%
Total product cost is generally divided into the categories of manufacturing costs and
general expenses.
Manufacturing costs are also known as operating or production costs.
Total product costs are commonly calculated on one of three bases:
• daily basis,
• unit-of-product basis, or
• annual basis
The annual cost basis is the best choice for estimation of total cost because
1) the effect of seasonal variations is smoothed out,
2) plant on-stream time or equipment operating factor is considered,
3) it permits more-rapid calculation of operating costs at less than full capacity, and
4) it provides a convenient way of considering infrequently occurring but large expenses
such as annual turnaround costs in a refinery.
Following books were used in preparation of notes
 Blank, L., Tarquin. A. 2005. Engineering Economy. 6th Edition, McGraw-Hill.
 Eschenbach, T. G. 2003. Engineering Economy”, 2nd Edition, Oxford University Press
 Riggs, J. L., Bedworth, D. D., Randhawa, S. U. 1996. Engineering Economics”, 4th Edition, Tata McGraw-Hill.
 Riggs, J. L., West. T. M. 1986. Essentials of Engineering Economics”, 2nd Edition, McGraw-Hill.
 Peter, M. S., Timmerhaus, K. D. 1991. Plant Design and Economics for Chemical Engineers. 4th Edition,
McGraw-Hill.

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Capital Investment

  • 1. Capital Investment Dr. K. Shahzad Baig Memorial University of Newfoundland (MUN) Canada
  • 2. Capital Cost Estimate Classifications Order of magnitude Toluene + Hydrogen Benzene
  • 3.
  • 6. The turnover ratio is the percentage of a mutual fund or other investment's holdings that have been replaced in a given year, which varies by the type of mutual fund, its investment objective and/or the portfolio manager's investing style. 𝑇𝑢𝑟𝑛 𝑂𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 𝑇𝑂𝑅 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑔𝑟𝑜𝑠𝑠 𝑠𝑎𝑙𝑒𝑠 𝐹𝑖𝑥𝑒𝑑 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 Turnover ratio The TOR for ammonia plant is 0.65
  • 7.
  • 8. Problem Statement Estimate the fixed capital investment of a 75000 ton/yr maleic anhydride plant using the data for fixed investment per per annual ton capacity in the table
  • 9. Maleic anhydride plant is $270 investment per annual ton/ capacity The fixed capital investment of a plant is 75000 ton/yr X $ 270 /annual ton = $20,300,000
  • 11. Lang method Battery limits encompasses the manufacturing area, all process equipment but excluding provision of storage, utilities, administrative building, auxiliary facilities unless specified. Usually it it excludes site preparation. Therefore, it may be applied to the extension of a plant
  • 12. Hand method Solve Problem 1 for the battery limit fixed capital investment by using Hand method and contingency of 15%
  • 13.
  • 14. Total product cost is generally divided into the categories of manufacturing costs and general expenses. Manufacturing costs are also known as operating or production costs. Total product costs are commonly calculated on one of three bases: • daily basis, • unit-of-product basis, or • annual basis The annual cost basis is the best choice for estimation of total cost because 1) the effect of seasonal variations is smoothed out, 2) plant on-stream time or equipment operating factor is considered, 3) it permits more-rapid calculation of operating costs at less than full capacity, and 4) it provides a convenient way of considering infrequently occurring but large expenses such as annual turnaround costs in a refinery.
  • 15. Following books were used in preparation of notes  Blank, L., Tarquin. A. 2005. Engineering Economy. 6th Edition, McGraw-Hill.  Eschenbach, T. G. 2003. Engineering Economy”, 2nd Edition, Oxford University Press  Riggs, J. L., Bedworth, D. D., Randhawa, S. U. 1996. Engineering Economics”, 4th Edition, Tata McGraw-Hill.  Riggs, J. L., West. T. M. 1986. Essentials of Engineering Economics”, 2nd Edition, McGraw-Hill.  Peter, M. S., Timmerhaus, K. D. 1991. Plant Design and Economics for Chemical Engineers. 4th Edition, McGraw-Hill.