CF = PAT + DEP 
PAT = PBT (1TR ) 
PBT = REV  OC  DEP 
CF : Cash Flow
DEP : Depreciation
PAT : Profit after Taxes
PBT : Profit before Taxes
REV : Revenue
TR : Tax rate (use 34%)
OC : Operating Costs.
TCI = FCI + WC 
FCI : Fixed Capital Investment
TCI : Total Capital Investment
WC : Working Capital
FCI = DIRECT COSTS+ INDIRECT COSTS 
Capital needed for the initial operation of the Plant. Raw material and supplies, cash for operating expenses. Typically it is 1020% of the Total Capital Investment TCI.
TYPE OF ESTIMATE 
BASIS 
ACCURACY 
Order of Magnitude 
Extrapolate Similar Plant Cost 
30% 
Study Estimate 
Knowledge of major pieces of equipment 
~ 30% 
Preliminary Estimate 
Based on Basic Engineering and Estimates. 
~ 20% 
Definitive Estimate 
Based on Basic Engineering and quotes from suppliers and contractors. 
~ 10% 
Detailed Estimate 
Based on Detailed Engineering. 
~ 5% 
In this course we will use Study Estimate as a basis for Flow Sheet Selection and Preliminary Estimates to assess the final cost of the Basic Engineering. It is important you realize what is the margin of error of these estimates.
Table 27 (P&T page 210) gives the percentages that need to be used to estimate the TOTAL PRODUCT COST.
When applying these percentages, make sure that the final number makes sense. For example, one million dollars per year for Research and Development for a Cyclohexane process (a proven technology) does not make sense. Labor costs are also troublesome. Use 0% on interest unless the capital is going to be borrowed.
All costs are calculated using the Equipment Purchase Cost as a basis. I have prepared the following summary Table you can use.
TABLE 4 
TABLE 17 
TABLE 26 

DIRECT COSTSOnsite 

Purchased Equipment 
E 
E 

Installation 
614% FCI 
47 % E 
2255 % E 
Instrumentation 
28% FCI 
18 % E 
630 % E 
Piping 
320% FCI 
66 % E 
1080 % E 
Electrical 
210% FCI 
11 % E 
1040 % E 
DIRECT COSTSOffsite 

Buildings 
318% FCI 
18 % E 
1070 % E 
Yard Improvement 
25% FCI 
10 % E 
Included in Service Facilities 
Service Facilities 
820% FCI 
70 % E 
40100 % E 
Land 
12% FCI 
6 % E 
12 % FCI (or 48 %E) 
INDIRECT COSTS 

Engineering (ENG) 
421% FCI 
33 % E 
530 % D 
Construction (CONST) 
416% FCI 
41 % E 
Included in Contractor's Fee 
Contractor's Fee 
26% FCI 
5 % (DIRECT+ENG+CONST) 
630 % D 
Contingency 
515% FCI 
10 % (DIRECT+ENG+CONST) 
515% FCI 
Startup 
812% FCI 
812% FCI 
812% FCI 
WORKING CAPITAL 

1020% FCI 
15% TCI 
1020% TCI 
A MUST BE DONE Project is a project that has no specific revenue or savings identified.
Examples
How do we calculate a Total Annualized cost for these type of Projects? Easy!!
TAC= AFC + OC 
TAC : Total Annualized Cost
AFC :Annualized Fixed Cost
OC : Operating Costs
For the time being, consider
AFC=FCI/n 
where n is the number of service years expected.
YOU WILL NEED THIS FOR DESIGN LAB: We will cover another formula for this after we cover the time value of money (interest).
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