Capital Cost Estimating In Process Design Flashcards
Define capital investment
The sum of money supplied in order to implement a design project
List some things included in the capital investment
Design work
Purchasing and installing of equipment
Capital investment can be further classified into…
…working capital and fixed capital
Define fixed capital
Total cost of the plant up to the point when the plant is ready for startup. It is a once-off cost that is not recovered at the end of the projects life other than the scrap value
Fixed capital cost includes…
- Design and other engineering and construction supervision
- All items of equipment and their installation
- All piping instrumentation and control systems
- Building and structures
- Auxiliary facilities
- Cost of development of the project
- Lab experiments
- Electrical equipment and materials
- Yard improvements
- Property costs
- Construction expenses
Define working capital
The additional investment needed, over and above the fixed capital, to start the plant up and operate it to the point when income is earned
Working capital includes…
- Start-up
- Initial catalyst charges
- Raw materials and intermediates in the process
- Finished product inventories
- Funds to cover outstanding accounts from customers
Working capital consists of what three primary assets?
- Inventories
- Accounts receivable
- Cash resources
How is working capital funded
- trade creditors
- interest bearing debt
- bank overdrafts
The accuracy of a capital cost estimate depends on which three factors
- The amount of design detail available
- The accuracy of the cost available
- The time spent on preparing the estimate
List the five types capital cost estimates can be classified into according to their accuracy and purpose
- Order-of-magnitude estimate (ratio estimate) - based on similar previous cost data (+30% accuracy)
- Study estimate (factored estimate) - based on the knowledge of major item of equipment (up to 30%)
- Preliminary estimate (budget estimate) - based on sufficient data (up to 20%)
- Definitive estimate (project control estimate) - based on almost complete data but before completion of drawings and specifications (10%)
- Detailed estimate (contractors estimate) - based on complete engineering drawings, specifications and site surveys (within 5%)
Define cost escalation (inflation)
The situation where prices of goods and services increase
Define cost indices
They relate present cost to past costs
What are cost indexes based on
Data for labour, material and energy costs published in government statistical digests
List the factors affecting investment and production costs
- Sources of equipment (cost savings can be made if idle or 2nd hand equipment can be used - otherwise several quotations should be obtained for new equipment)
- Price fluctuations (price levels for both equipment and man-hours increase)
- Company policies (Policies of individual companies have a direct effect on cost)
- Operating time and rate of production
- Governmental policies (policies on waste disposal, water usage and taxes)
