8.2.

1 FIXED CAPITAL INVESTMENT(FCI)

Fixed capital investment refers to the overall cost incurred from the construction, design and
installation of a plant and the required modifications needed for full functionality of the plant.
[CITATION Tow08 \l 1033 ]. The FCI represents the cost to build a manufacturing facility
ready for start-up. It includes the cost of the building with the fixed (nondisposable) equipment,
piping, instrumentation, and utilities installed. Estimates of facility costs are often made using
factorial estimates.
Some features of fixed capital investments include;

 Low liquidity
In general, the definition of liquidity can be stated as follows:
“Anything which is easily saleable in the market and gets an expected value (price) is
said to be liquidable. That is, it has a liquidity.” Low liquidity means something,
which is not easily realizable (i.e., saleable). Fixed capital is used to acquire
(purchase) fixed assets. These assets have a low liquidity because they are not easily
saleable.
 Permanent in nature
Fixed capital has a long-lasting existence. It is permanent in nature. It cannot be
withdrawn from the business. However, it can be withdrawn only when the business
closes or shuts down (i.e., liquidates).
 Primary sources
Primary sources of fixed capital are shares, debentures and long-term loans. In the
accumulated i.e., total fixed capital,
The owners’ funds come from shares.
The fixed borrowed funds come from debentures.
The long-term loans are obtained from financial Institutions.
Of the above three sources, shares are the main source of fixed capital.
 Long-term needs
Fixed capital is used to meet the long-term needs of the business some of which are
listed below.
Amalgamation.
Merger.
Foreign collaboration.
Sharing or leasing of technologies.
 Appreciation and depreciation
The meaning of two terms viz., appreciation and depreciation are contrary to each
other. Their individual meaning is stated below.
Appreciation means an increase in the value of an asset being used.
Depreciation indicates a decrease in the value of an asset being used.
Fixed assets can undergo either an appreciation or depreciation over a period of time.
The value (price) of some fixed assets like land appreciate after some period of time.
However, the value of other fixed assets such as building, machinery, furniture, etc.,
depreciate after some period of time.

The fixed capital investment to be considered for the plant consists of four components.
They are;
8.2.1.1 Inside Battery Limits (ISBL) Investment
The ISBL plant investment includes the cost of acquiring and installing all the process
equipment that makes up the new plant. This is divided into direct field cost and indirect field
cost which literally implies cost incurred directly in the field and cost incurred indirectly.
These include
Table 8.2 Pre-treatment process equipment cost
S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Crusher 12,800.00 1.30 16,640.00
2 Insulated vertical 8,300 1.22 10,126.00
tank
3 Centrifugal dryer 4,500 1.64 7,380.00

Table 8.3 Glycolysis process equipment cost

S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Stochiometric 25,999.65 2.05 53,299.28
Reactor

Table 8.4 Extraction process equipment cost

S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Heat exchanger 67,488.70 1.61 108,656.81
2 Insulated vertical 8,300 1.22 10,126.00
tank

Table 8.5 Filtration process equipment cost

S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Centrifugal filter 15,700 7.36 115,500.00

Table 8.6 Crystallization process equipment cost

S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Heat exchanger 67,488.70 1.61 108,656.81
2 Crystallizer 15,700 6.91 108,500.00

Table 8.7 Water recovery process equipment cost

S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Centrifugal pump-01 4,200 7.57 31,800.00
2 Distillation column 136,500 4.39 599,100
3 Centrifugal pump-03 4,100 6.66 27,300.00
4 Agitated tank mixer 6,500 1.44 9,360.00
Table 8.8 Solvent recovery process equipment cost
S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Centrifugal pump 4300 7.74 33,300.00
-02
2 Distillation column 416,900 2.82 1,174,800.00
3 Centrifugal pump 4100 7.32 30,000
-04
4 Agitated tank mixer 6,500 1.44 9,360.00

Table 8.9 Catalyst recovery process equipment cost

S/N Equipment Total purchase cost Install factor Total installed
(USD) cost (USD)
1 Insulated vertical 8,300 1.22 10,126.00
tank
2 Agitated tank mixer 6,500 1.44 9,360.00
3 Evaporator 15,700 7.45 117,000.00
4 Centrifugal filter 15,700 7.36 115,500.00

The installation cost of an equipment refers to the total cost associated with the designing,
fabricating, transporting and installation of the equipment. It also includes costs such as labor
cost, freight cost, shipping cost, costs of mounting, piping and flanges connections, etc.
The installed cost of each equipment covers both the direct and associated indirect costs.
Therefore, the ISBL cost for the 20,000kg/hr. production of BHET plant is the sum of the
individual Total Installed Cost (TIC) for each equipment. This amounted to $2,675,890.9
(two million, six hundred and seventy-five thousand, eight hundred and ninety dollars, nine
cents).

8.2.1.2 Outside Battery Limits (OSBL) Investment

The OSBL investment denotes the cost of additional modifications that must be done on the
plant site to accommodate the construction of a new plant or expansion of the current
capacity of one existing. The OSBL investment consist of costs such as power generation
stations, waste water treatment facilities, feed and product flowlines, storage facilities, road
network, offices, workshop, maintenance facilities, firefighting system, fencing etc., The
OSBL cost is usually estimated to be a percentage of the ISBL cost. It can range from 10% to
100% of the ISBL cost. According to [ CITATION Tow08 \l 1033 ] if the plant is to be
constructed on a green-field site, the OSBL cost will be towards the high side of the range.
Since this design project is for the construction of a BHET production plant, it is assumed it
will be done on a green-field site. Hence, the OSBL cost was estimated to be 70% of the
ISBL cost. This amounted to $1,873,123.63 (one million, eight hundred and seventy-three
thousand, one hundred and twenty-three dollars, sixty-three cents).
8.2.1.3 Engineering costs
This cost consists of the costs of the Front-End Engineering Design as well as other services
required to carry out the project. Examples include detain design and engineering of process
equipment, drafting of plant layout, procurement of bulk items, administrative charges, etc.
According to [ CITATION Tow08 \l 1033 ], a common estimate for engineering costs is 30%
of the addition of both ISBL and OSBL costs for small-scale projects and 10% of the addition
of ISBL and OSBL costs for large-scale projects. For this project, the engineering costs were
estimated to be 15% of the addition of both costs. This amounted to $682,352.18 (Six
hundred and eighty-two thousand, three hundred and fifty-two dollars, eighteen cents).

8.2.1.4 Contingency
These are the extra costs accounted for in the project budget to accommodate deviations from
the cost estimate. Apart from the deviations, contingency charges also covers things such as
foreign exchange risks, labor disputes, fluctuation in prices of equipment, and other
unexpected problems. A minimum contingency charge of 10% of the addition of ISBL cost
and OSBL cost is recommended on all project budgets [ CITATION Tow08 \l 1033 ].
Applying this recommendation to the BHET project, it amounted to $454,901.45(Three
hundred and five thousand, one hundred and forty-four dollars, eleven cents).
Hence, the total FIXED CAPITAL INVESTMENT for the 20,000 Kg/day BHET production
plant is $5,686,268.16 (Five million, six hundred and eighty-six thousand, two hundred and
sixty-eight dollar, sixteen cents).