DOOF Inc.

Yogurts beyond Taste

UNIVERSITY OF SANTO TOMAS B.S. CHEMICAL ENGINEERING 1

Design of an Industrial Scale Plant for the Production of Yogurt using

Yacon (Smallanthus sonchifolius) as Sweetener

An Industrial Plant Design Project

Presented to the
Department of Chemical Engineering
University of Santo Tomas

In Partial
Fulfillment of the
Requirements for the Degree of
Bachelor of Science in Chemical Engineering
ChE 521 – Chemical Engineering Plant Design

By

Joric John B. Canlas

Loi Karlo G. Cruzat

Adrian B. Dacasin

Bernadette L. de Guzman

Joshua Daniel F. Solomon

Copyright © 2019 DOOF Inc. All Rights Reserved.

 DOOF Inc.
Yogurts beyond Taste

UNIVERSITY OF SANTO TOMAS B.S. CHEMICAL ENGINEERING 2

CHAPTER 5

ECONOMIC ANALYSIS

5.3 Cash Flow

To illustrate and summarize the cash going in and out of the company, a

cash flow diagram was used. As shown in the figure below, the total capital

investment and the total product cost was input in a 10-year forecast.

Figure 5.3.1 – Cash Flow Diagram for Yogurt Production

Figure 5.3.2 – Cash Flow Diagram for Biomass Pellets Production

Copyright © 2019 DOOF Inc. All Rights Reserved.

 DOOF Inc.
Yogurts beyond Taste

UNIVERSITY OF SANTO TOMAS B.S. CHEMICAL ENGINEERING 3

5.4 Profitability

5.4.1 Return on Investment

The calculation for the Return on Investment (ROI) is given by the

equation,

Average Annual Profits

ROI=
Total Capital Investment

The average annual profit is the summation of the Annual Revenue of

Yacon yogurt and the Annual Revenue of Biomass pellet subtracting the

expenses.

Average Annual Profit= Annual Revenue−Expenses

Whereas the Annual Revenue will come from the annual profit of Yacon yogurt

and biomass pellets. Thus,

Annual Revenue=804541.71+10723.99

Annual Revenue=815265.7

The Total Capital Investment (TCC) will come from the TCC of Yacon yogurt

and biomass pellets. Thus,

Total Capital Investment =2616410.12+34922.77

Total Capital Investment =2651332.89

The expenses will come from the depreciation value and disbursement of

the manufacturing plant. However, there will be no disbursement thus the

expense will mainly come from the depreciation.

Copyright © 2019 DOOF Inc. All Rights Reserved.

 DOOF Inc.
Yogurts beyond Taste

UNIVERSITY OF SANTO TOMAS B.S. CHEMICAL ENGINEERING 4

Expenses=Disbursement + Depreciation

Depreciation=( FCC −Salvage )

[ i
( 1+i )n−1 ]
There will be no salvage value, the interest rate is 10%, and n = 10.

Depreciation=141405.09

Therefore,

Average Annual Profits

ROI=
Total Capital Investment

815265.7−141405.09
ROI= =25.42 %
2651332.89

An ROI of 25.42% shows that the proposed manufacturing plant is

profitable.

5.4.2 Annual Equivalent

The Annual Equivalent (AE) is computed by the equation given below,

[ ] [ ]
n
i ( 1+i ) i
AE=−TCI n
+ AnnualRevenue−Disbursement+ Salv
( 1+i ) −1 ( 1+i )n−1

Substituting the values,

[ ]
10
0.1 ( 1+ 0.1 )
AE=−2651332.89 +815265.7
( 1+0.1 )10−1

AE=383773.419

The annual equivalent of the manufacturing plant at an interest rate of

10% spanned at 10 years is computed as shown above. Since the annual

equivalent is positive, then, the process plant is profitable.

Copyright © 2019 DOOF Inc. All Rights Reserved.

 DOOF Inc.
Yogurts beyond Taste

UNIVERSITY OF SANTO TOMAS B.S. CHEMICAL ENGINEERING 5

5.4.3 Net Present Value

Shown below is the calculation of the net present value of the company

considering the total product cost and the total capital investment. Since the net

present value is positive, then, the process plant is profitable.

NPV =−TCI +(AnnualRevenue −Disbursement)

( 1+ i )n −1
i(1+i)
n
+ Salv
[ i
( 1+i )n−1 ] [ ]
NPV =−2651332.89+ ( 815265.7 )
[ ( 1+ 0.1 )10−1
0.1 ( 1+0.1 )
10
]
NPV =2358121.913

5.4.4 Internal Rate of Return

Shown below is the internal rate of return of the company. Since the IRR

is greater than 15%, the manufacturing plant is indeed profitable.

0=−TCI + ( AnnualRevenue−Disbursement )
[ (1+ IRR )n−1
i ( 1+ IRR )
n
] [
+Salv
1
( 1+ IRR )n−1 ]
0=−2651332.89+ ( 815265.7 )
[ ( 1+ IRR )10−1
IRR ( 1+ IRR )
10
]
IRR=0.2818=28.18 %

5.4.5 Payback Period

The Payback Period is computed by the equation below,

PP=Depreciable ¿ Capital ¿
Annual Profit + Depreciation

By substituting with DFC = TCI,

Copyright © 2019 DOOF Inc. All Rights Reserved.

 DOOF Inc.
Yogurts beyond Taste

UNIVERSITY OF SANTO TOMAS B.S. CHEMICAL ENGINEERING 6

2651332.89
PP=
815265.7+141405.09

PP=2.77 yrs

By comparing the PP to the reference PP, the reference PP is computed as

shown as below,

FCI
ref . PP=
FCI
MARR∗TCI +
n

Where Minimum Attractive Rate of Reutrn (MARR) is approximately

equal to the interest rate

(2223948.60+29684.36)
ref . PP=
(2223948.60+29684.36)
0.1∗2651332.89+
10

ref . PP=4.59 yrs

Since the reference Payback Period is larger than the Payback Period, the

investment is therefore justified.

5.5 Summary of Economic Analysis

The designers performed 5 tests of profitability to test whether the

manufacturing plant proposed is profitable or not. The 5 tests are the Return of

Investment (ROI), Annual Equivalent (AE), Net Present Value (NPV), Internal

Rate of Return (IRR), and Payback Period (PP). The ROI is reported as 25.42%,

the AE and NPV have a positive value, the IRR is 28.18%, and the PP is 2.77 yrs

Copyright © 2019 DOOF Inc. All Rights Reserved.

 DOOF Inc.
Yogurts beyond Taste

UNIVERSITY OF SANTO TOMAS B.S. CHEMICAL ENGINEERING 7

which is less than the reference PP (4.59 yrs). With this, it is concluded that the

proposed plant is profitable and any investment on the said plant is justified.

References

[1] Peters, M. S., Timmerhaus, K. D., & West, R. E. (2003). Plant design and

economics for chemical engineers. Boston: McGraw-Hill.

Copyright © 2019 DOOF Inc. All Rights Reserved.