NEW FORMULAE FOR ESTIMATING FIXED INVESTMENT CAPITAL COSTS

NEW FORMULAE FOR ESTIMATING FIXED INVESTMENT CAPITAL COSTS

ABSTRACT

Fixed capital investment cost is very important for the start up of any chemical plant, because it determine the evaluation of any project in a company. Before commencement of any chemical plant, there are certain amount needed for the operation such amount is called the working capital. Which is the capital needed for the plant to operate to the point when income is earned. It includes the cost of raw materials and intermediates in the process start up cost, finished methods inventories, and funds to cover outstanding accounts from customers. Fixed capital is of two types namely; the manufacturing fixed capital investment and non – manufacturing fixed investment. The methods use for estimating or calculating fixed capital investment cost in chemical plant or process industries includes the followings;

1. land factors
2. detailed –items estimate
3. percentage of delivered – equipment cost
4. unit – cost estimate
5. power factor applied to plant capacity ratio
6. investment cost per unit of capacity
7. turnover ratios

For any chemical plant operation, fixed capital investment cost is necessary, to determine the evaluation of any project.

TABLE OF CONTENT

CHAPTER ONE

1. Introduction                                                                1

1.1       Manufacturing fixed capital investment         2

1.2       Non-Manufacturing fixed capital investment 3

1.3       Method use for calculating fixed

capital investment                                                       4

1.4       Types of compartmentalization                                   6

CHAPTER TWO

1. Literature review                                                         7
2. Estimating cash flow                                                  9
3. Project evaluation                                                       11
4. Project design                                                                         11
5. Payback period                                                                       12
6. Public cost indices                                                      13
7. Industrial approach                                                     14
8. Accounting rate of return (arrangement)        14
9. Discounted cash flow

(net present value) method                                         15

1. Acceptance criterion                                                   17
2. Time value of money                                                  17
3. Power factor applied to plant capacity ratio   18
4. Investment cost per unit of capacity               19
5. Turnover ratios                                                                        19
6. New method for estimating fixed cost                       19

CHAPTER THREE

3.0       Estimating fixed cost investment                               21

3.1       Method for estimating fixed cost investment 21

3.2       Detailed – item estimate                                             22

3.3       Unit-cot estimate                                                        22

3.4       Percentage of delivered equipment cost         23

3.5       Lang factors for approximation of

capital investment                                                      24

3.6       Factors considered in estimating cost                         24

3.7       Prevailing cost                                                                         25

3.8       Inflation                                                                                  26

3.9       Foreign exchange rates                                               28

NEW FORMULAE FOR ESTIMATING FIXED INVESTMENT CAPITAL COSTS