CHE 451 CHEMICAL PROCESS DESIGN & ECONOMICS

Assignment 3: (Due Wed, Mar 27, 2024)

Question 1

The projected costs for a new chemical plant are given below (all numbers are
in million GH¢):

Land Cost = GH¢ 7.5

Fixed Capital Investment = GH¢ 120
- (GH¢ 60 at end of year 1, GH¢ 39.60 at end of year 2, and GH¢ 20.40 at end
of year 3)
Working Capital = GH¢ 35 (at start-up)
Start-up at end of year 3
Revenue from sales = GH¢ 52
Cost of manufacturing (without depreciation) = GH¢ 18
Tax rate = 40%
Depreciation method: use a straight-line depreciation method over 7 years.

Length of time over which profitability is to be assessed = 10 years after startup

Internal rate of return = 9.5% p.a.

For this project, do the following:

(a) Draw up a cumulative (discounted) after-tax cash flow diagram.
(b) Calculate the following discounted profitability criteria for the project:
(i) Net present value
(ii) Simple payback period
(iii) Discounted payback period
(iv) Discounted cash flow rate of return (DCFROR)

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Question 2

A plant is proposing to install a combined heat and power (CHP) system to supply
electrical power and process steam. Power is currently taken from a utility
company and steam is generated using on-site boilers. The capital cost of the CHP
plant is estimated to be GH¢ 3 million. The CHP plant is expected to give net
savings of GH¢700,000 per year. The plant is expected to operate for 10 years
after the completion of construction. Construction will take two years, and the
capital will be paid in two equal increments, at the ends of the first and second
year. The savings (income) can be taken as paid at the end of each year.
Production will start on the completion of construction.

(i) Calculate the net present value (NPV) of the project at a discount rate of 8 per
cent.

(ii) Calculate the discounted cash flow rate of return.

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