TABLE OF CONTENTS Key Learning Objectives:
How to estimate process capital and operating costs
How to find and forecast prices for use in economic analysis
How corporations finance projects
Different criteria that companies use to compare the financial attractiveness of alternative projects, and other factors that are also taken into account in project selection
How to allow for error in cost estimates
Most chemical engineering design projects are carried out to provide information from which estimates of capital and operating costs can be made. Chemical plants are built to make a profit, and an estimate of the investment required and the cost of production is needed before the profitability of a project can be assessed. Cost estimation is a specialized subject and a profession in its own right, but the design engineer must be able to make rough cost estimates to decide between project alternatives and optimize the design.
This chapter introduces the components of capital and operating costs and the techniques used for estimating. Simple costing methods and some cost data are given, which can be used to make preliminary estimates of capital and operating costs in the early stages of design. Sources of cost data and methods for updating cost estimates are described. The main methods used for economic evaluation of projects are introduced, together with an overview of factors that influence project selection.
Most cost-estimating and economic analysis calculations are easily carried out using spreadsheets. Templates are introduced in the examples throughout the chapter. Blank templates are...
