Perry’s Chemical Engineers’ Handbook, Eighth Edition

Section 9: Process Economics

Overview

James R. Couper, D.Sc. Professor Emeritus, The Ralph E. Martin Department of Chemical Engineering, University of Arkansas Fayetteville (Section Editor)

Darryl W. Hertz, B.S. Manager, Front-End Loading and Value-Improving Practices Group, KBR (Front-End Loading, Value-Improving Practices)

(Francis) Lee Smith, Ph.D., M.Eng. Principal, Wilcrest Consulting Associates, Houston, Texas (Front-End Loading, Value-Improving Practices)

GENERAL COMMENTS

ACCOUNTING AND FINANCIAL CONSIDERATIONS

Principles of Accounting

9-4

Financial Statements

9-5

Balance Sheet

9-5

Income Statement

9-6

Accumulated Retained Earnings

9-6

Concluding Remarks

9-6

Other Financial Terms

9-6

Financial Ratios

9-7

Relationship Between Balance Sheets and Income Statements

9-7

Financing Assets by Debt and/or Equity

9-7

Cost of Capital

9-9

Working Capital

9-9

Inventory Evaluation and Cost Control

9-9

Budgets and Cost Control

9-10

CAPITAL COST ESTIMATION

Total Capital Investment

9-10

Land

9-10

Fixed Capital Investment

9-10

Example 1: Use of Cost Index

9-13

Example 2: Inflation

9-13

Example 3: Equipment Sizing and Costing

9-13

Estimation of Fixed Capital Investment

9-13

Example 4: Seven-Tenths Rule

9-14

Example 5: Fixed Capital Investment Using the Lang, Hand, and Wroth Methods

9-14

Comments on Significant Cost Items

9-16

Computerized Cost Estimation

9-17

Contingency

9-17

Offsite Capital

9-17

Allocated Capital

9-17

Working Capital

9-17

Start-up Expenses

9-17

Other Capital Items

9-17

MANUFACTURING-OPERATING EXPENSES

Raw Material Expense

9-18

Direct Expenses

9-18

Utilities

9-18

Operating Labor

9-18

Supervision

9-18

Payroll Charges

9-18

Maintenance

9-18

Miscellaneous Direct Expenses