SECIT control A 325 000ty methanol plant built in Australia 5 ve Process improve
ID: 2807534 • Letter: S
Question
SECIT control A 325 000ty methanol plant built in Australia 5 ve Process improvements have caused the comple steps to 11. Environmental requirements ito be ost Australia. Plant cost escalation has averaged 4%tanad years aa5 duced from 15 process Ap>plexity an additional 20% over those for coSt gium ver in Belgium over the last 10 1. averaged 4% y-inuditi of a500 000ty methanol plant Estimate the capital cost to be built in Belgium with construction startingnxy (0) (16 marks) required to give an average Return on Investment of lonne investment, with a plant life of 10 years? 3% on the fixed (b) What is the annual average surplus (net cash flow)e 9 marks) DATA Australia Belgium Cost indices: 5 y ago 3 y ago 1 y ago 124 136 152 139 157 183 Exchange rates 5 y ago 3 y ago Now 0.9 per Aus 1.2 per AusS 1.4 per Aus Location factors: 5 y ago Belgium:Australia 1.08:1.0 Plant scale factor: 0.6Explanation / Answer
.(a) Estimation of Plant Cost:
Cost of 325,000 t/year plant in Australia 5 years ago=Aus$120 million
Location factor 5 years ago:
Belgium: Australia 1.08:1.0
Cost of the plant in Belgium 5 years ago in Aus$=$120*1.08 million=$129.60 million
Exchange rate 5 years ago = € 0.90 per Aus$
Cost of the plant in Belgium 5 years ago in Euro=€ 0.90*129.60million= € 116.64 million
Cost of the plant 1 year ago=€ 116.64*(183/139)million= € 153.562 million
Average plant cost escalation rate=4%=0.04
Estimated Cost of the 325,000 t/year plant in Belgium next year= € 153.562 million*((1+0.04)^2)
Estimated Cost of the 325,000 t/year plant in Belgium next year= € 166.0927 million
PLANT SCALE FACTOR=0.6
Estimated Cost of the 500,000 t/year plant in Belgium next year=€ 166.0927 million*((500000/325000)^0.6)
Estimated Cost of the 500,000 t/year plant in Belgium next year=€ 215.0812 million
Additional Environmental clearance cost=20%
Estimated capital cost=€ 215.0812 million*1.2=€ 258.0974 million
Estimated capital cost=258 million euros
.b)
Required return=15%=0.15
Present value=258(million euros)
Number of years=10
CAF=Capital Recovery Factor(A/P,I,N)=(i(1+i)^N))/(((1+i)^N)-1)
i=0.15
N=10
CAF=(0.15*(1.15^10))/((1.15^10)-1)=0.199252
Annual average surplus required =0.199252*258 million euros= € 51.41 million
Annual production =500,000 tonnes=0.5 million tonne
Annual average surplus (net cash flow) per tonne of methanol required=€ (51.41/0.5)= € 102.81
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