CHE 448

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CHE 448 Chemical Engineering Design
Spring 2006
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Final Design Report

• Your first and second reports must be on file.
• Due Tuesday, April 25
• DO NOT USE, recommended, profitability analysis
  spreadsheet found in the book CD-ROM.
• Oral presentation 15 minutes/team, maximum.

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Cost Accounting and Capital Cost Estimation
Chapter 16

• Asses the financial condition of a company from
  its annual report
• Estimate purchase cost of equipment
• Estimate cost of installing equipment materials,
  labour, indirect
• Estimate total investment cost for new plants and
  processes.

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Annual Report

• Nature of business
• Summary of important events
• New acquisitions and partnerships
• Plans for near future
• Summary of concerns
• Collection of financial statements
• Balance sheet
• Income statement
• Cash flow statement

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The Balance SheetAssetsLiabilitiesNet worth
ASSETS (in M)
Current assets
Cash, Inventory, Acc Rec and other 4,630
Total current assets 4,630
Investments Property 9,581
Total Assets 14,211
LIABILITIES
Current (4153) Noncurrent Liab. 9,850
Total Liabilities 9,850
STOCKHOLDERS EQUITY
Common stock 5,230
Retained earnings 2,559
Less treasury stock (3,428)
Net Stockholders Equity 4,361
Total liabilities Stockholders Equity 14,211
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Income statement Net profit Revenues-costs of
sales-operating expenses-taxes
Net sales 11,504
Costs of goods sold 9,131
GROSS PROFIT 2,373
OPERATING EXPENSES
Research and Development 446
Selling, general, and administrative 439
Insurance and finance 34
Amortizatiz and adjustmts of goodwill 64
TOTALOPERATING EXPENSES 983
INCOME FROM OPERATIONS 1,390
Interest expense 185
GROSS INCOME 1,205
Provisions for income taxes 402
NET INCOME 803
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SOLUTIA, Inc. (2003)

• Net Sales (Millions) 2,241
• Gross Profit 363.
• Profit/Sales 16
• Marketing Exp/Sales 14
• Operating Inc/Sales 2
• Income before tax/Sales (4)
• Basic earning/share (0.08)
• Dividends/share 0.04
• Total Assets 2,706
• Long Term debt 839
• Stock price/share 3.63
• Outstanding shares 104.7
• Stockholders equity 380.

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Financial Ratio Analysis I
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Financial ratio analysis II
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Financial ratio analysis III
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Cost Indexes

• The Chemical Engineering (CE) Plant Cost Index
  Whole-plant index for all chemical
  industries(100 for 1958)
• Marshall Swift (MS) Equipment Cost Index All
  industry, equipment purchase cost (100 for
  1926)
• The Nelson Refinery Cost Index. Oil Gas J.
  Whole-plant index for petroleum industry(100
  for 1946)
• The Engineering News-Record (ENR) Structural
  steel, lumber, concrete and labour Construction
  Cost Index (100 for 1967)

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Evolution of cost indexes
Year CE/CPI MS/CPI Nelson/CPI ENR/CPI CPI
1975 3.38 8.4 10.71 3.847 53.8
1985 3.02 7.56 9.98 3.64 107.6
1995 2.5 6.8 9.13 3.34 152.4
2000 2.287 6.4 8.96 3.36 172.3
2001 2.229 6.26 8.91 3.45 177.2
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Capital Cost Estimation

• Order of Magnitude Estimate (50-100). Cost
  information from a complete process previously
  built, only major equipment.
• Study (Major Equipment Factored) Estimate
  (30-70) Flowsheet. List of major equipment.
  Equipment sized and cost from correlations.
• Design (Scope) Estimate (10-40) Flowsheet and
  plot plan. Accurate sizing. Approximate piping
  layouts.
• Definitive (Project Control) Estimate (1-15)
• Detailed (Firm or Contractor) Estimate (0-2)

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Summary of Estimation Levels

• Definitive (1-15)
• Almost complete PID. Sketches of elevation
  diagrams.Specification of all equipment,
  utilities, instrumentation, etc.
• Detailed (0-2)
• Complete engineering of process and off-site
  facilities. Vendor quotes. PID plot plan and
  isomeric diagrams.

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Capital Investment Costs

• Is it a grass-roots plant or an addition to an
  existing integrated complex?
• Are all utilities available?
• Are we going to buy electricity or co-generate?
• Is there good road/railroad/water access?
• Must we build equipment onsite?
• Can we work outside year round?

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Plant Site Plan
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Components of Total Capital Investment CTCI
CWC CTPI (Table 16.9)

• Working Capital
• Total Permanent Investment
• Cost of Land, Royalties, Startup
• Total depreciable Capital
• Contingencies and contractors fees
• Direct Permanent Investment
• Bare-Module Investment
• Site preparation
• Service facilities
• Utility plants and related facilities