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In the past, the estimation of equipment cost is quite laborious and tedious job which
requires working with general equations or chart, or obtain cost relations on equipment size,
considerations (Peters, Timmerhaus, & West, 2003). For a more accurate equipment cost
estimation, equipment price quotation from a suitable vendor must be provided (Turton et. al
2012).
Fortunately, because of the rapid technological advancement, the routinely process of cost
estimation has become easier. Equipment cost estimation can now be done automatically, with
Here, the estimation of purchased equipment costs is based on the capacity of the
equipment calculated in the equipment design and is estimated using CAPCOST 2008 from the
book “Analysis, Synthesis and Design of Chemical Processes” by Turton et al. The necessary data
like the current cost index based on the Chemical Engineering Plant Cost Index (CEPCI) is used.
Currently, for the first quarter of 2017, Chemical Engineering Plant Cost Index is equivalent to
553.1.
Table 4.1 Table of Equipment Cost Using CAPCOST 2008 (CEPCI = 553.1)
Compressors Compressor Type Purchased Equipment Bare Module
Cost Cost
C-101 Rotary $33,200 $80,000
Conveyors Type Purchased Equipment Bare Module
Cost Cost
Cv-101 Screw $9,920 $19,800
Cv-102 Screw $8,030 $16,100
Exchangers Exchanger Type Purchased Equipment Bare Module
Cost Cost
E-101 Floating Head $38,700 $127,000
E-102 Floating Head $26,200 $86,300
E-103 Floating Head $25,600 $84,400
Pumps (with Pump Type Purchased Equipment Bare Module
drives) Cost Cost
P-101 Centrifugal $7,480 $29,800
P-102 Centrifugal $6,930 $27,600
P-103 Centrifugal $6,830 $27,200
P-104 Centrifugal $6,830 $27,200
P-105 Centrifugal $6,830 $27,200
P-106 Centrifugal $6,830 $27,200
Reactors Type Purchased Equipment Bare Module
Cost Cost
R-101 Autoclave $909,000 $1,360,000
R-102 Jacketed Agitated $115,000 $172,000
R-103 Fermenter $66,200 $99,300
Towers Tower Description Purchased Equipment Bare Module
Cost Cost
T-101 12 Carbon Steel Sieve $27,200 $71,800
Trays
T-102 20 Carbon Steel Sieve $28,800 $53,400
Trays
T-103 45 Carbon Steel Sieve $69,900 $123,000
Trays
T-104 Empty Vertical Vessel $18,600 $79,400
T-105 Empty Vertical Vessel $18,600 $79,400
Miller Miller Description Purchased Equipment Bare Module
Cost Cost
M-101* Roller Mill $88,423.0342 -
(Note: M-101 is manually inputted because there is no miller equipment in CAPCOST)
For M-101,
Using a Ball Mill with capacity of 1 to 30 ton/h as cost model based on CHEMCAD 6,
Equipment Code Type Pressure Power Area (m2) No. of Volume Height (m) Diameter (m) Material of Equipment Cost
(barg) (kW) Spares (m3) Construction ($)
Compressor C-101 Rotary - 18 - - - - - Carbon Steel 33200
Conveyor CV-
Screw - - 4.27 - - - - Carbon Steel 9920
101
Conveyor CV-
Screw - - 2.74 - - - - Carbon Steel 8030
102
Exchanger Floating
E-101 2.533 - 122.64 - - - - Carbon Steel 38700
Head
Exchanger Floating
E-102 2.533 - 13.84 - - - - Carbon Steel 26200
Head
Exchanger Floating
E-103 2.533 - 17.8 - - - - Carbon Steel 25600
Head
Pump P-101 Centrifugal 1.01 2.31 - 1 - - - Carbon Steel 7480
Pump P-102 Centrifugal 1.01 1.25 - 1 - - - Carbon Steel 6930
Pump P-103 Centrifugal 1.01 0.64 - 1 - - - Carbon Steel 6830
Pump P-104 Centrifugal 20 0.53 - 1 - - - Carbon Steel 6830
Pump P-105 Centrifugal 1.77 0.56 - 1 - - - Carbon Steel 6830
Pump P-106 Centrifugal 1.77 0.44 - 1 - - - Carbon Steel 6830
Reactor R-101 Autoclave 20 - - - 119 10.5749 3.535 Carbon Steel 909,000
Reactor Jacketed
R-102 1.01 - - - 33.6 5.5679 2.784 Carbon Steel 115000
Agitated
Reactor R-103 Fermenter 1.01 - - - 11.899 3.221 2.1474 Carbon Steel 66200
Tower (12) Sieve
T-101 2.533 - - - - 14.2 0.707 Carbon Steel 27200
Tray
Tower (20) Sieve
T-102 2.533 - - - - 10 0.65 Carbon Steel 28800
Tray
Tower (45) Sieve
T-103 2.533 - - - - 18.06 0.903 Carbon Steel 69900
Tray
Tower Vertical
T-104 2.533 - - - - 4.88 1.83 Carbon Steel 18600
Vessel
Tower Vertical
T-105 2.533 - - - - 4.88 1.83 Carbon Steel 18600
Vessel
*Miller M-101 Roller Mill - - - - - Carbon Steel 88423.0342
SUB-TOTAL 1525103.034
Freight Charge
152510.3034
(10%)
TOTAL ($) 1677613.338
TOTAL
83,880,666.88
(PHP)
II. Estimation of Working Capital
A large sum of money must be supplied to purchase and install the necessary machinery
and equipment, before an industrial plant can be put into operation. Land and service facilities
must be obtained and the plant must be established with complete piping, controls and services.
Furthermore, it is necessary to have money available for the payment of expenses involved in the
Fixed Capital Investment is defined as the total cost of processing installations, buildings,
auxiliary services and engineering involved in the establishment of a new plant. About 85 to
90 percent of the total capital is comprised of fixed capital. It is categorized into manufacturing
fixed capital investment also known as direct costs and nonmanufacturing fixed capital
The cost estimation of the Fixed Capital Investment is based from the book “Plant Design
and Economics for Chemical Engineer” by Peters, Timmerhaus, and West (2003). This is
calculated by selecting the appropriate percent Fixed Capital Investment (%FCI) shown in
Table 4.2. The estimated costs were verified using the % purchase equipment cost listed in
Table 6-18 of the same book. The obtained value of FCI is 451,277,987.8 PHP.
Table 4.3 Breakdown of Direct Costs and Indirect Costs
COMPONENT Range of FCI, % Selected FCI, % Normalized FCI, % Estimated Cost (PHP) Calculated FCI, %
Direct Costs
Purchased Equipment 15-40 25 18.79699248 83880666.88 18.58736059
Purchased Equipment Installation 6-14 10 7.518796992 33552266.75 7.434944238
Instrumentation & Controls 2-12 8 6.015037594 26841813.4 5.94795539
Piping 4-17 10 7.518796992 33552266.75 7.434944238
Electrical Systems 2-10 8 6.015037594 26841813.4 5.94795539
Buildings (including services) 2-18 15 11.27819549 50328400.13 11.15241636
Yard Improvements 2-5 3 2.255639098 10065680.03 2.230483271
Service Facilities 8-30 20 15.03759398 67104533.5 14.86988848
Land 1-2 1 0.751879699 8388066.688 1.858736059
Indirect Costs
Engineering & Supervision 4-20 10 7.518796992 33552266.75 7.434944238
Construction Expenses 4-17 8 6.015037594 26841813.4 5.94795539
Legal Expenses 1-3 2 1.503759398 6710453.35 1.486988848
Contractor's Fee 2-6 26 4.511278195 20131360.05 4.460966543
Contingency 5-15 7 5.263157895 23486586.73 5.204460967
TOTAL 133 100 451277987.8 100
Checking if the estimated costs are within the percentage range given in the book “Plant Design and Economics for Chemical Engineers” by Peters,
Direct Costs = material and labor involved in actual installation of complete facility (65-85% of
Indirect Costs = expenses which are not directly involved with material and labor of actual
The total capital investment is the sum of the fixed capital investment and of the working
capital. In this report, the Working Capital is calculated as 15% of the Total Capital
Investment.
C. Working Capital
The Working Capital required to start up the plant and finance ordinarily amounts to
the production cost before revenues from the process start. This consists of the total amount
of money invested in raw materials and supplies carried in stock, finished products in stock
and semi-finished products in the process of being manufactured, accounts receivable, cash
kept on hand for monthly payment of operating expenses such as salaries, wages and raw
Production costs are the costs incurred in manufacturing a good or providing a service. It includes
a variety of expenses including, but not limited to, labor, raw materials, consumable manufacturing
supplies and general overhead. Additionally, any taxes levied by the government or royalties owed
The cost of production is directly related to the manufacturing cost or the costs of both
the materials and the labor required in the creation of a product. Indirect costs include overhead
such as rent, administrative salaries or utility expenses. Generally, the total production cost is the
In the estimation of the production costs presented in this chapter, an annual cost basis
was used as this method offers the convenience in considering equipment operating factor and
infrequently occurring large expenses. It also permits a more rapid calculation of the operating
costs and smoothens out seasonal variations within the operation of the plant.
A. Manufacturing Costs
Manufacturing costs may be classified under three sub-categories: direct cost, fixed charges
1. Direct Costs
In manufacturing industries, the cost of raw materials and labor cost are primarily
classified as direct costs. These are directly associated to the manufacturing process and
may include other expenses such as the costs of utilities and repair and maintenance costs.
The amount of the raw materials which must be supplied per unit of time or per unit
of product can be determined from process material balances. Direct price quotations from
prospective suppliers are preferable to published market prices. For preliminary cost
analyses, market prices are often used for estimating raw-material costs. In chemical plants,
raw-material costs are usually in the range of 10 to 50 percent of the total product cost.
The cost of raw materials was estimated on an annual basis with the adapted price of
on adding up the various principal processing steps on the flow sheet (as proposed by HE
Wessel). In this method, a process step and the number of employee-hours per production
per step are specified. The number of hours per step is multiplied by the total number of
Three principal processing steps were considered and the labor cost was estimated on
the basis of 50 - employee hour in a day for each processing step and the plant runs
throughout the 365 days of a year. An hourly wage rate of $33.67 (Php1683.50) for skilled
operation. The extent of necessity for this type of labor depends on the total amount of
operating labor, complexity of the operation, and product quality standards. The cost for
Utility costs for ordinary chemical processes amount to 10 to 20 percent of the total
product cost. The cost of utilities such as process water, steam, and electricity was
To keep the plant in efficient operating condition, repair and maintenance are
necessary and the expenses for this include the cost for labor, materials, and supervision.
instrumentation are primary concern, annual maintenance cost is estimated at 7-11 percent
of the FCI, about 4-6 percent of which is for the materials needed and 3-5 percent for the
labor.
Annual costs for equipment maintenance were estimated at 7 percent of the estimated
cost of the purchased set of equipment. This estimation is reasonable enough as repair and
maintenance expenses are usually estimated ranging from 2 - 10 percent of the costs of
2. Fixed Charges
This classification covers the expenses that are practically constant from year to year
and not greatly influenced by the rate of production such as depreciation, property taxes,
The tax and insurance rates were estimated at 1% and 0.4% of the fixed capital
3. Overhead Costs
The expenditures required for the routine services of a complete plant functioning as
one unit are included in plant & overhead costs. The direct costs and fixed charges of non-
manufacturing machinery, equipment, and buildings necessary for many of the general
Similar to the fixed charges, these costs do not vary widely with changes in the
production rate. It may include costs for hospital and medical services; general plant
maintenance and overhead; safety services; payroll overhead including pensions, vacation
allowances, social security, and life insurance; packaging, restaurant and recreation
expense for operating labor, supervision, and maintenance. A rough estimate of 50 percent
was considered.
B. General Expenses
Besides the manufacturing costs, other general expenses are involved in any company’s
operations. These general expenses may be classified as (1) administrative expenses, (2)
distribution and marketing expenses, and (3) research and development expenses.
1. Administrative Costs
administrative costs if the economic analysis is to be complete. These costs may vary
markedly from plant to plant and depend somewhat on whether the plant under
This classification of costs varies widely for different types of plants depending on the
particular material being produced, other products sold by the company, plant location,
and company policies. Typically, for most chemical plants these costs range from 2 to 20
percent of the total product cost. The higher figure usually applies to a new product or to
one sold in small quantities to a large number of customers while lower figures apply to
Emphasis on research and development paves the creation of new methods and
products in chemical industries. In the chemical industry, costs for research and
This feasibility analysis assesses the practicality of the proposed plant design. This can be
done by comparing the current market price of bioethanol to the proposed price of bioethanol
from this report, calculating the return of investment, profitability, and payback period. Through
the following factors enumerated, this plant design report may be plausible and suitable for
operation.
A. Profitability
Currently, according to ICIS, a market information provider, the fuel-grade ethanol price
in Southeast Asian market is $518 - $522 per cubic meter or approximately P25,900 - P26,100
per cubic meter in Philippine currency. With this information, this design report must have a
lower bioethanol price or equivalent to the current market price to compete in the market.
P 616298998.1/yr
Ethanol Price
100000 * 365 kg/yr
( )
785.1kg./m3
The calculated ethanol price is almost half the market price which means the ethanol
produced could compete in the market along with experienced ethanol producers. Thus, to
maximize the plant profit, the selling price of ethanol produced corn stover would be
P23,000/m3.
Total Income (Annual Plant Capacity)(Selling Price)
23,000/m3
Total Income (365)(100,000 kg/day)( )
785.1kg/m3
The total income accounts for the total money received annually by the company from
Consequently, the gross income accounts for the total money received annually by the
company from selling all the ethanol produced during operation and deducting total cost of
production. Hence, considering a 35% tax rate and subtracting it from the gross income,
Therefore, the annual plant profit is calculated as P294,444,499.8. It can be inferred from
this that a fast payback period can be expected when compared to the capital investment for
the plant.
B. Payback Period
However, to compute for the time that the capital invested is returned or more commonly
known as payback period, the depreciation which accounts for the allocated cost of tangible
assets over its useful life must be known. The cost of tangible assets is the direct cost from
Table 4.4 less the non-depreciable assets, land and equipment installation cost.
Tangible Assets Cost Direct Cost - Land Cost - Equipment Installation Cost
Tangible Assets
Depreciation
Recovery Period
298,615,174.1
Depreciation
9.5
Depreciation P31,433,176.22
451277987.8
Payback Period
294444499.8 31433176.22
PaybackPeriod 1.38 yrs
Since, the payback periods for both the depreciation methods are close, with MACRS
faster by just a factor 0.07 years to Straight-Line method, the design engineer can choose
either of the two. However, given the economical setup of Philippines, it is more preferable
to use straight-line method. Therefore, for this design report, a payback period of 1.38
years is chosen.
C. Return of Investment
Return of investment is an economical tool used for financial decisions. It measures the
benefits obtained from investing of some resource. Additionally, this is a profitability ratio to
294444499.8
%ROI (100)
530915279.8
%ROI 55.46
From the calculated ROI, it can be concluded that this report is deemed attractive for
operation.
Life of project earnings
2750
Land, salvage, and working
capital recovery
2250
1250
Construction 750
period
Total capital
investment
(including land) Annual net profit
Start of
construction 250 after taxes
(constant)
-3 capital
Fixed -2 -1 0 1 2 3 4 5 6 7 8
investment -250
(depreciable)