ECONMIC ANALYSIS

This plant design project that we have shown below can yield profit when operated under
conditions. The foremost concern of the investor is in rate of return (ROR) and on the accuracy
of the cost.
A capital investment is very important and a requirement for an industrial process and the
determination of the any process consist of fixed capital investment of equipment and all the
facilities in the plant necessarily the investment is an important part of the plant design project
The total investment for any working capital should be able to pay salaries and keep a
continuous flow of raw materials and handle every other special items requiring a direct cash
outlay.
Moreover, in the below analysis is income tax is not take into consideration.
Using the payback period, rate of return and unit product cost a profitability analysis will be
conducted to see the visibility of this plant design.

Basic of economic analysis:

Plant operation: 3 shifts per day
Process: Continuous
Working period: 330 days
Plant production rate: 1000kg/day

FIXED CAPITAL INVESTMENT

22

The fixed capital investment is the capital needed to supply the necessary manufacturing and
plant facilities. It can also be defined as the total cost of the plant ready for startup. The fixed
capital investment can be divided into two. That is:
1. The direct fixed capital investment
2. The indirect fixed capital investment
EQUIPMENT QUANTITY COST ($) TOATAL AMOUNT
($)
STORAGE TANK 3 4250 12750
PUMPS 2 2800 5600
NEUTRALIZER 2 31450 62900
SULFONATION 1 35000 35000
REACTOR
TOTAL 116250

COMPONENTS % OF EQUIPMENT TOTAL COST ($)

PURCHASED EQUIPMENT 100 116250
INSTRUMENTATION 36 41850
PIPING 45 52312.5
ELECTRICAL 24 27900
BUILDING 22 25575
SERVICE FACILITIES 75 87187.5
LAND/PROPERTY 12 13950
TOTAL 365025
DIRCET COST:

INDIRECT COST:
COMPONENTS % OF EQUIPMENT TOTAL COST ($)
CONSTRUCTION 38 44175
CONTINGENCY 36 41850
CONTRACTOR FEES 22 25575
DESIGN AND ENGINEERING 40 46500
TOATAL 158100

FCI = DIRECT COST + INDIRECT COST

FCI = 365025 + 158100
FCI = $523125
WORKING CAPITAL INVESTMENT
WCI = 10% FCI
WCI = 0.1*523125
 WCI = $52312.5
TOTAL CAPITAL INVESTMENT
TCI = FCI + WCI
TCI = 523125+52312.5
TCI = $575437.5

TOTAL PRODUCTION COST:

RAW MATERAL MASS CONSUMED COST PER KG ($) COST ($) PER YEAR
PER BATCH (KG)
FATTY ACID 645.8 3.5 17901576
SULFUR 277.8 20 44003520
TRIOXIDE(SO3)
H.L.S 923.6 6.5 47546928
NaOH 138.88 14.10 15509007.36
CITRIC ACID 1.79 10 141768
SODIUM CITERATE 2.4 0.69 13115.52
TOTAL 125115914.9

A. VARIABLE COST:
COMPONENTS COST ($)
RAW MATERIALS 125115914.9
MISCELLANEOUS 12% OF MAINTENANCE 6277.5
MATERIAL COST
UTILITIES 16% OF FCI 83700
TOTAL 89977.5

B. FIXED COST:
COMPONENTS COST ($)
MAINTENANCE COST 10% OF FCI 52312.5
ROYALITIES 2% OF FCI 10462.5
LOCAL TAXES 3% OF FCI 15693.75
CAPITAL CHARGES 25% OF FCI 130781.25
INSURANCE 2% OF FCI 10462.5
 TOTAL 219712.5
C. GENERAL EXPENSES:

COMPONENTS COST ($)

FINANCING 12% OF TCI 69052.5
ADMINISTRATION COST 10% OF TCI 57543.75
TOATAL 126596.25

TOTAL MANUFACTURING COST:

TMC = A + B
TMC = 89977.5+219712.5
TMC= $309690

TOTAL PRODUCT COST:

TPC = A + B + C
TPC = 89977.5+219712.5+126596.25
TPC = $436286.25

OUR PROFIT COST = (TMC/PRODUCT PER YEAR)

= (309690/330*1000)
= $0.9 OR $1

PROFIT ANALYSIS:
PROFIT = SELLING PRICE – COST PRICE
P = 1.5 – 1
P = $0.5
% PROFIT ANALYSIS = (PROFIT/REVENUE) *100
% PROFIT = (0.5/1) *100
% PROFIT ANALYSIS = 50% PROFIT

GROSS SCALES = PRODUCTION * PRODUCT PRICE

GROSS SCALE = 436286.25 * 1.5
GROSS SCALE = $654429.375
GROSS PROFIT = GROSS SCALE – MANUFACTURING COST
GROSS PROFIT = 654429.375 – 309690
GROSS PROFIT = $344739.375

PAYOUT PERIOD:
PAYOUT PERIOD = (INVESTMENT/NET CASH FLOW)
= (436286.25/1251591.49)
= 0.34 years
RATE OF RETURN:
RATE OF RETURN = (PROFIT/ (FCI/2 + WCI) *100)
= (344739.375/ (523125/2+52312.5) *100)
= 109.83%

BREAK EVEN ANALYSIS:

BREAK-EVEN POINT (UNITS)= FIXED COST/ (REVENUE PERUNIT-VARIABLE COST)
FIXED COST = $219712.5
VARIABLE COST = $89977.5
VARIABLE COST/UNIT = 89977.5/ (330 * 1000) = $0.27
SELLING COST =
SELLING COST/UNIT =
BREAK-EVEN POINT = 219712.5/ ( - 0.27)

( ) UNIT MUST BE SOLD IN ORDER TO GET PROFIT .

BREAK-EVEN ANALYSIS GRAPH: