Download - EngrD 2190 – Lecture 17 - Cornell University
Concept: Process Economics – Operating Costs vs. Capital Costs
Context: Producing and Selling Chemical Commodities
Defining Question: What is the Economy of Scale?
Recap:
EngrD 2190 – Lecture 17
cost capitalprofitROI
lifetimeequipment cost capitalondepreciati
costs operatingrevenueprofit
ne methodstraightli
Calculation Session today: Spreadsheets for Mass Balances with Economic Analysis.Bring a charged laptop with Excel installed and the Solver routineinstalled and the spreadsheet template for Exercise 3.112 downloaded.See Monday’s Lecture Handout for basic Excel functions and instructionsto install Solver. Try the Mass Balance tutorial on pp. 182-186 of textbook.
Bring pp. 182-186 to Calculation Session.
Try Exercise 3.112 before Calculation Session. Start with the downloadedtemplate, enter formulae for mass flow rates in the process flowsheet and enterformulae for economic parameters.
Homework Teams:Peer Evaluations and New Team Questionnaires Due Friday 10/8.May be submitted in Calculation Sessions.New Teams to be announced Friday 10/15.
Want to remain with your present team? If so EVERY team membermust send e-mail FROM THEIR CORNELL NetID to [email protected] Friday 10/8 at noon.
Want to request a team? If so EVERY team member must send e-mailFROM THEIR CORNELL NetID to [email protected] by Friday
10/8 at noon. Requested team must have no pairs from present teams.
Sophomores: study abroad at Imperial College London!
Five weeks during the summer - last week of June through July.
Study abroad at a world-class university and gain industrial trainingin the Carbon Capture Pilot Plant, built to the highest industrial standards
and spans four floors to provide a hands-on experience. The programalso offers instruction in five laboratory experiments and
a rig-building competition.
yield%2/year02.0$ 30,000,000$/year 11,500,000 0.05
cost capitalprofitROI
If profits are only 2% of revenue,yield is 0.8%/year.
(reactants)
reactants: rate in rate consumed $/year to suppliersdt
d )assets(
labor: rate in rate consumed $/year to employees
utilities: rate in rate consumed $/year to service providers
(products)
products: rate out rate created +$/year from buyers
10% per year
equipment: rate in rate out $/year depreciation
2150 k$
Solution is posted.
3930 k$/year
year/$000,930,3
kg$131
yeardaysproduction300
dayproductionkg100revenue
PP
year/$000,620,1
kg$70.2
yeardaysproduction300
dayproductioninertkg2000costreactant
+A
year/$900,96
kg$17.0
yeardaysproduction300
dayproductionwastekg1900costdisposal
year/$000,215
years10000,150,2$
lifetimecapitalcostcapitalondepreciati
2712 k$/year
year/$100,218,1
year/$900,711,2000,930,3
costoperatingrevenueprofit
1218 k$/year57 %/year
year/%57000,150,2$
year/$900,218,1
costcapitalprofitROI
3590 k$
Solution is posted.
3930 k$/year2473 k$/year1457 k$/year
41 %/year
year/$000,053,1
kg$70.2
yeardaysproduction300
dayproductioninertkg1300costreactant
+A
year/$200,61
kg$17.0
yeardaysproduction300
dayproductionwastekg1200costdisposal
year/$000,359
years10000,590,3$
lifetimecapitalcostcapitalondepreciati
year/$800,456,1
year/$200,473,2000,930,3
costoperatingrevenueprofit
year/%41000,590,3$
year/$800,456,1
costcapitalprofitROI
Scheme II has the higher profit! Why not build Scheme II?
Assume you have 3.59 M$ to invest.You have at least three options:
1. Build Scheme II.profit = 1.457 M$/year
ROI = 41 %/year
2. Build Scheme I and leave1.44 M$ in bank at 10%/year.profit = 1.218 + 0.144 M$/year
= 1.362 M$/yearROI = 1.362/3.59 = 38 %/year
3. Build a larger Scheme I.profit > 1.218 (2150/3590)
> 2.034 M$/yearROI > 57 %/year
Why? The Economy of Scale.In general, equipment costsscale to the 0.6 power.A reactor 2 as large costsonly 20.6 = 1.5 more.
3.112 The mass balances can be calculated iteratively with a spreadsheet.However, we will need a definitive solution to use Solver to optimize.
1. Overall mass balance(1)(90)
2. Equipment specification:½ of P in bottoms stream.
(9)
3. Composition into splitter =composition out of splitter.9 90 = 810
(810)
4. Mass balanceon splitter.
(8)(720)
5. Mass balanceon combiner.
(18)(810)
Old Turbine: Profit = Revenue Operating Costs= 180,000 $/year 10,000 $/year = 170,000 $/year.
Old Turbine: Profit = 180,000 $/year (10,000 $/year + $300,000/10 years)= 137,000 $/year.
New Turbine: Profit = Revenue Operating Costs= 198,000 $/year (5,000 $/year + $450,000/15 years)= 163,000 $/year.
year/%46
$300,000year/$000,137ROI
:Turbine Old
year/%36
$450,000year/$000,163ROI
:Turbine New
Solution is posted.
What if both profits were negative?
year/%46
$300,000year/$000,137ROI
:Turbine Old
year/%36
$450,000year/$000,163ROI
:Turbine New
What if the cost of electricity doubles?
Spreadsheets: Excel and Circular References
Should enter “= sum(B1:B4)”
Instead, incorrectly enter “= sum(B1:B5)”
PA liquid-gasseparator
reactorA P
50% conversion
A 100
Anegligible
purge
AP
A
Spreadsheets: Excel and Circular References, cont’d
= input + recycle = 0.5 reactor feed
= reactor output
= separator bottoms
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