CHEN 4450 Process Economics and Safety Assignments

Homework Assignments

.Homework #1: P&T Chapter 6 problem 1 only; Use M & S all industry equipment index. See revised problem statement for Peters 6-1: 1(a) What will be the 1990 purchased cost of a similar heat exchanger with 20 m² of heating surface if the purchased cost capacity exponent is 0.60 for surface areas ranging from 10 to 40 m² and the purchased cost capacity exponent is 0.81 for surface areas ranging from 40 to 100 m²? 1(b) What would be the purchased cost of a heat exchanger with 100 m² heating surface in the year 2000? For problem 6-3, use the purchased cost capacity exponent 0.93 for the entire capacity range. Calculate the equipment cost of a 300,000 kg tank, not the capital investment cost of the entire process.

Homework #2: P&T Chapter 6 problem 7. Use Method C.

Homework #3: P&T Chapter 6 problem 8; Assume land is available. Disregard the statement about indoor construction. Use Method C. Assume WCI is 15% of TCI.

Homework #4: P&T Chapter 6 problems 10.

Homework #5: P&T Chapter 6 problems 13(a, b, c only).  (Use values from Figure 6-8 for manufacturing costs that are not given. Ignore the distribution cost number in the problem statement. Assume the labor costs given include operating supervision. Omit depreciation. Omit catalysts and solvents. Assume maintenance and repairs are 7% of FCI. For the General Expense category in Figure 6-8 use the mid-point of the range of values in Table 6-18 for plant overhead ( at 10% of total product cost ) and administrative costs, distribution and marketing and research and development ( at 20% of total product cost ). The final sum of individual items for total product cost takes the form of the following algebraic relation: y = a + by, where y is total product cost and a and b are numbers. Solve for y.

Homework #6: Problem 1a: Determine the annual direct operating labor costs for a 200,000 metric ton per year plant in December, 2001. Assume an operating factor of 95%, so that the operating daily rate is (200,000/0.95) metric tons per year while the plant is in operation. Assume the plant is located in Seattle, Washington (Pacific Coast Region). Assume a highly automated plant with two processing steps. Use Table 6-15 for the national wages for skilled laborers employed at the plant and Table 6-12 for the geographic and productivity factors involved. Assume the employee hours per processing step in Figure 6-9 refers to a productivity index of 1.0 in Table 6-12. When adjusting the annual labor cost from national wages and productivity to local wages and productivity multiply by the local relative wage rate and divide by the local relative productivity in Table 6-12 to arrive at the annual direct operating labor costs in Seattle.
                         Problem 1b: Assume the same plant is located in Mobile, Alabama (Gulf Region), what is the annual direct operating labor costs?

Homework #7:  It is desired to determine the purchased equipment costs for the following items effective 2002.
    Problem 1a: Centrifugal pump, 900 gallons per minute, specific gravity 1.00, materials of construction-stainless steel, inlet pressure 600 psig, outlet pressure 800 psig.
    Problem 1b: Motor for the above pump, explosion-proof (so it can be used with flammable fluids). Use middle-of-the-range pump efficiencies as well as motor efficiencies. What are the fluid power, brake power and motor power in kW and motor cost?
   References: Page 515 and Figures 12-15; 12-17,18 and 12-23,24 for problems 1a and 1b.

   Problem 2a: Floating-head heat exchanger, carbon steel shell and stainless steel tubes with a design pressure of 200 psia and a surface area of 500 square meters with price effective 2002. Reference Figure 14-19.

Homework #8:  It is desired to determine the purchased equipment costs for the following items in 1990, see the M and S all industry index.
     Problem 1a: What was the cost in 1990 of a 2 meter diameter by 10 meter length horizontal storage vessel for a corrosive fluid? The design pressure is 500 psig and the design material is nickel alloy. Refer to Figure 12-54.
     Problem 1b: What was the cost in 1990 of a jacketed and stirred 500 gallon stainless steel reactor with a 5 horsepower agitator suitable for operation at 900 psig? Refer to Figure 13-15.
     Problem 1c: What was the cost in 1990 of a stainless steel vertical pressure vessel (column) which is 2 meters in diameter by 20 meters high designed for 300 psig? Refer to Figure 15-11.
     Problem 1d: What was the cost in 1990 of 12 stainless steel sieve trays for the above column? Multiply the cost per tray by the number of trays and also by the quantity factor in the figure. Refer to Figure 15-13. 

Homework #9: Problem 1: What is the Fixed Capital Investment of a 80,000 ton per year ethylene oxide (used to make an intermediate for antifreeze) plant in the year 2002 using Method E-power factor capacity? Refer to Table 6-11.

      Problem 2a: A corporation borrowed the amount of money required to construct a major addition to their specialty chemical plant site. They borrowed the funds from an investment bank, a total of $70,000,000 for 10 years at 9% per year. What will be the total amount of funds they will have to repay the bank in a lump sum at the end of 10 years using simple interest?
      Problem 2b: The same problem above using compound interest instead of simple interest.

      Problem 3: Information is provided for a fluid processing plant:
                            FCI = $30,000,000 in the year 1998
                            Product sales price = $3.00/lb
                            Raw materials, utilities and maintenance = $1.20/lb product
                            Direct labor (operating labor) =$0.30/lb product
                     3a: What is the approximate WCI?
                     3b: What is the approximate delivered purchased equipment cost in 1998?
                     3c: What is the approximate purchased equipment cost in 1998?
        Note: additional information is provided beyond what you will need to solve the problem.

Homework # 10: Problem 1: What is the present worth if the company savings rate is 4%, the future worth is $100,000,000 and
the time period from the present to the time of the future worth is 6 years.

                          Problem 2a) For a plant investment of $150,000,000 what is the future worth of that investment if the savings rate is 5% and the time is 10 years?
                                        2b) How much money would the company have at the end of ten years if it had put $150,000,000 in a bank and earned 5% per year for 10 years? (default investment strategy)

Homework #11: Problem 7-17 with the following modifications: Assume a salvage value of $0, the recovery period should be taken as 5 years for both straight line and MACRS depreciation methods, and delete the sum-of-digits depreciation method.
                         Problem 7-14 with the following modifications: Assume a salvage value of $0, also find the reduction in income tax charges for the 5 year recovery MACRS depreciation method over the 9.5 year straight line depreciation method for the second and third years, as well as the first year (Need to determine the income tax saving for years 1, 2 and 3 for MACRS over straight-line depreciation).

Homework # 12: Problem 8-2 with the following modification: The annual profit of $3,000,000 is the gross profit per year before depreciation. Calculate the payback period instead of the payout period. Use straight-line depreciation. Since it straight-line depreciation, the depreciation amount is the same each year. Use an income tax rate of 35%.
                           Problem 8-7 Change the word "unnecessary" to "elective". There can be more than one acceptable design. Hint: Use Design 1 as the base case. Evaluate the return after taxes by incremental investment and incremental cost savings of the other designs relative to Design 1, which can be assumed to be acceptable. Exclude depreciation as a cost item. The 15% rate of return minimum is an incremental ROI minimum.

Homework # 13: Problem 8-10 with the following modifications: Omit part c (The DCFR).For part a, use the definition for cash flow at the end of Ch# 6 and a 35% corporate income tax rate. Note that the net profit for the each of the first three years is negative, but the cash flow for each of the 7 years is positive. Use a 7 year project life. For part b use equation 8-4. Use a discount rate (alternative investment rate or savings rate) of 5% in part b instead of the 15% nominal discount rate. The value of PWF sub cf,j is the present worth factor from Ch#7, specifically eqn 7-31, with cf,j refering to cash flow for the jth year, such that PWF sub cf,j  is equal to (1+i) raised to the minus jth power. Class life is the same as recovery period. Use a 6 year project period for part b of problem 8-10 (do calculations for each of the first 6 years). Use zero salvage value.  Assume the plant was constructed and all funds invested at time zero, so that PWF sub v,j in front of the Total Capital Investment symbol is 1.0.

Homework # 14: First problem: Problem 8-10 part c (the DFCR). Use all the modifications to problem 8-10 in the previous homework assignment except use a 10 year project life with years 8,9 and 10 being the same as year 7. Use equation 8-6 for DCFR. Instead of the iterative solution use the following two values for i and evaluate how close each value is to solving the problem; that is how far in each case the right hand side of the equation differs from zero: i equal to 5% and i equal to 10%. Each of these i's should be designated i sub DCFR to distinguish them from loan interest or savings interest.
                          Second problem: Determine ROI and Payback Period for problem 8-10 with the 10 year project period described above. Read Selecting a Profitability Method on pages 330 and 331 of your text.

Homework # 15: Solve Homework Problem B from the bottom of this page (scroll to the very bottom of the page). Sunk costs refer to costs incurred at time zero. The investment is made year zero and the plant starts right afterward so the PWF sub v,j is 1.0. Net present value is the same as net present worth. The description of the proposed plant is located above HW A. Depreciation is over 10 years. Assume corporate savings rate is 5%, which is i sub d. Part 1: Do ROI, payback period and net present worth. Do not do DCFRR. Use a project period of 10 years (do calculations on the first 10 years). Please ignore the check point net present value, it may be wrong as it may be at 10% savings interest and 10 years project life. Part 2: Do the DCFRR. Solve the same equation you did for the NPW except keep i sub d as a variable and set NPW equal to zero. You need to do this on the computer as it is an implicit algebraic equation which needs to be solved by numerical methods.

Homework # 16: Solve two short problems from Crowl and Louvar, Ch#1 and read Ch#2:
                           Problem 1. Modify to 8 hr shift, 5 days per week and 50 weeks per year. Determine the following: (a) Calculate the fatality rate in deaths per person per year and compute (1)the ratio of the death rate of a worker in that plant to the death rate due to smoking and (2) the ratio of the death rate in that plant to traveling by car. (b) Determine the number of years of exposure in that plant at the above working time per year it would take to reach the probablity of one death.
                            Problem 5. Assume each employee works 40 hours per week and 50 weeks per year.

Homework # 17A: Using Table 2-8, calculate the maximum mole % permissible exposure limit (PEL) for the following common gases when present in air: (Convert from ppm to mole %). Remember ppm is on a volume basis for gases. Use ideal gas law for all gases.

Ammonia, Carbon Dioxide, Chlorine, Nitric Oxide

Homework # 17B: Toxicology Concepts: Prepare a Table: In the first column list the 4 entry routes for toxicants to enter the body and in the second column the control methods for reducing or preventing entry for each of the corresponding potential entry routes for toxicants located in (one row for each entry route): In each of the following situations assume the toxicant could be present in a gas or aerosol phase in a work environment that is similar to: a) a regular air conditioned classroom, such as Ross Auditorium (prepare one table), b) a service bay (Wilmore Unit Ops Lab) with large portable fans (prepare a second table), c) fume hoods in a regular bench lab (prepare a third table). (There may be a lot of “see Table 1” entries in Tables 2 and 3).

Homework #19: Problem 3-14 Use the TLV data from Ch #2. Use eqn 3-4.

Problem 3-21. See property data at top of page 106. Modify the compound to benzene instead of toluene and the temperature to 110 degrees F instead of 85 degrees F.
Problem 3-25. Assume the fill nozzle is 2 inches. Assume splash filling.

Homework #20: Problem 4-3. Use sonic flow with C sub zero equal to 1.0.  TLV data in Ch#2. Hydrogen sulfide property data in Table 4-3. Hint: See example 4-4 for part of problem and use equation 3-9 with k=0.125 from Table 3-12 for the rest. Solve for Q sub m using equation 3-9 first. Assume pure hydrogen sulfide in the tank, atmospheric pressure outside, and choked flow.
                          Problem 4-6. Do part (a) only except as follows: assume C sub zero is 0.61, the tank diameter is 2 meters, the hole diameter is 10 millimeters. Compute the initial mass discharge rate of liquid in kg per second and the time for the tank to empty to the level of the leak in hours.

Homework #21: Problem 5-3. Rural area. Directly downwind implies y=0 and z=0.
                           Problem 5-4. Urban area. Directly downwind implies y=0 and z=0, which is on the ground. Use equation 5-53 to determine σ_z . Then use Pasquill-Gifford to find x and then σ_y.

Homework #22: Lab Problem 1: Problem 8-10 modified as follows: For each of the first five years determine the depreciation, book value at the beginning and end of the year, and net profit. Note the net profit and the income tax can both be negative for some years. Then do parts a and b. The corporate savings rate is 10% instead of a discount rate of 15%. The fixed capital investment is $20 million and the WCI is $2 million instead of the values in the problem. Use MACRS depreciation with a recovery period of 5 years. Class life is the same as recovery period. Note that PWF sub cf,j is the present worth factor from Ch # 7. Use zero salvage value. Assume PWF sub v is 1.0.

Lab Problem 2: Determine the ROI and the Payback Period for the modified problem above.

Homework #23: Problem 6-3a,d. Ethyl ether and diethyl ether are the same. See Example # 2.
                                                      Problem 6-15 Modify to 200 lb tank. Assume an explosion efficiency of 2%. Refer to Examples 6-8 and 6-9. Delta H sub c is in Appendix B on page 566.

Homework #24: C & L Problem 10-3 a (Hint: There are 6 study nodes including the control system), b (Study node is hot solvent line from heat exchanger, process parameter is flow, possible causes to consider (in order) are: 1. Failure in solvent supply, 2.Valve V-1 is closed, 3. Solvent line is plugged, 4. Break in heat exchanger tube, 4. Solvent supply pressure increases, 5. Valve V-1 partially closed, 6. Partial failure of solvent supply, 7. Leak in heat exchanger tubes, 8. Steam leaks through heat exchanger tubes into solvent, 9. Contaminated solvent supply, 10. High downstream pressure, 11. Wrong material in solvent supply, 12. Valve V-1 opened too soon, 13. Valve V-1 opened too late. 14. Leak in exchanger from solvent into steam.) Complete possible consequences and actions required.

Homework #25: Due Monday, Oct 31: Project literature assignment. The alkylate splitter feed comes form the alkylation process product. In order to fully understand the characteristics of the feed it is necessary to understand the upstream process and the products. References you should read include 1. One page description of the alkylate splitter that you can pick up from Sue Ellen Abner or Sheila Chaki in the ChE Dept office, 2. Kirk-Othmer Encyclopedia of Chemical Technology- the first part of the article on Alkylation, pp 85-112 ( the part of the article including Fig 1 and 2 on the sulfuric acid and HF processes until the start of the section on alkylation of aromatics), 3. Internet Google search on motor alkylate; and 4. Any other source you can find. Retain this literature search to put it in your project report. Kirk-Othmer is in the Reference Section of the Library adjacent to the Reference Desk under call letter TP.

Specific homework questions for you to turn in on Monday based on your literature search: 1) Hydrocarbons are classified as paraffins, olefins, napthenes and aromatics (PONA). What is % P, %O, %N and %A in your products: motor alkylate and heavy alkylate? 2)(a) Using your appreciation for the chemistry of the two Alkylation processes plus comments in the article on impurities/ problems, what impurities do you think might be in the Alkylate Splitter feed on a regular basis? Would these impurities go through the Alkylate Splitter and end up in a product? If so, which one or both products? (b)What impurities might be in the feed during a process upset or a minor accident? 3) Would you reconsider the choice of materials of construction, type of equipment or add one or more pieces of equipment as a result of your literature search. If so, what do you recommend? You may want to look more on the internet. 4) What is the typical octane number for motor alkylate using the sulfuric acid and HF processes?

Homework #26: Problem 8-9.
Problem 8-18a, except determine droplet velocity, not vapor velocity.
                          Problem 8-19a, except modify the problem to select the distance from the base of the flare to be zero. In equation 8-4 the units for 960 are BTUs per lb and the M is dimensionless.

Homework #27: Problem 9-1a,b. Reynolds Number is more than 5000 for both parts.
                          Problem 9-18. The stock tanks have no insulation. Q sub m is equal to Q divided by the heat of vaporization. Hint: Equation 9-10 provides the equation for chi (the fancy looking x). Use equation 9-13 to obtain the required rupture disc vent area for vapors, not equation 9-35.

Homework #28: 1. Determine the annual direct labor costs and the total number of direct labor employees (operators) needed given the number of employees (operators) per shift provided in the handout.
                            2. Determine the raw material costs from the flow diagram in the earlier handout, plus the stream material balances and the raw material unit prices provided in the current handout.
                            3. Determine the utility and service costs from the flow diagram in the earlier handout plus the utility or service amounts and unit prices provided in the current handout. The wastewater has a specific gravity of 1.0.

Homework #29: Each student needs to do this homework set as opposed to one contribution from the entire group.                             1. Determine the fixed capital investment for the tailored protein production facility employing the total 2004 purchased equipment costs from the handout using the Lang factor method for solid/fluid processing plants.
                                                       2. Determine the annual maintenance costs for this plant. The plant will be highly instrumented with extensive attention to cleanliness and sterility for high product quality so the tailored protein can be used for pharmaceutical applications. Use the average of the highest maintenance percentages in Table 6-16.
                                                       3. Determine the annual total product cost with the format of Figure 6-8 (except total raw materials and total utilities) using the total annual values for raw materials, utility and service and direct labor from Monday's class; as well as the annual maintenance and fixed capital investment from the above two problems. Use the suggested factors from Figure 6-8 if the specific manufacturing cost is not known e.g. operating supervision, operating supplies, etc. For plant overhead use 10% of total product costs; for administrative costs 3% of total product costs; for distribution and marketing 5% of total product costs; and for research and development 5% of total product costs. Exclude catalyst costs, depreciation and income taxes. Assume 90% operating factor which was built into the number of batches per year ( 65.7 ) in the raw material cost calculations.
                                                       4. Determine the working capital investment (WCI) by summing one month of raw materials plus one month of direct labor, supervision and maintenance.                                   

Homework #30: Each student needs to do this homework set as opposed to one contribution from the entire group. 1. Determine the annual depreciation for this tailored protein facility.  Use a 5 year MACRS recovery period and the FCI from Wednesday's homework.
             2. Determine the sales price of the tailored protein that will provide a 15% ROI in the first
year of production. Assume FCI and WCI occur in year zero. The amount of protein produced per batch is on the same handout as the raw material costs. Prepare annual net profit table for the first 5 years. Use a 5 year project time period.
             3. For the above protein sales price determine the PBP (payback period), NPW and DCFRR.
Use the two case method for the DCFRR, with the first case at 15%. Use a 5 year project time period. Prepare annual cash flow table for the first 5 years.

Homework #31: 1. Do problem 7-23 Crowl except use propane instead of toluene. Assume the liquid spill completely vaporizes as fast as it is released. Assume a rural location. The spill is released at ground level. Liquid propane has a density of 4.2 lb/gal. Assume the area of open flame is directly downwind of the process area.

2. Do problems 7-22 (List the hazardous components present. Should the motors be XP or non-XP? Is the electrical division 1 or 2?). Also do 7-24 Crowl (Assume a ceiling height of 12 feet. Determine dilution ventilation rate.)

Homework #32: a. Determine ethyl alcohol anhydrous fuel grade prices using the ICIS Students Chemical Prices on the Internet for Aug 2006. Report the Gulf Coast spot price range. From the ICIS home page scroll down on the left hand side column and click on Students and then click on Chemical Prices.

b. Determine heat exchanger, column and reactor equipment prices using the tables in the handout. Update prices to second quarter 2007, M-S All Industry Index = 1383.6. R-301 has nickel alloy tubes inside the reactor. Exclude costs for demister, mixer and couplings on the columns for this estimate. Perforated trays and plates are similar to sieve trays. Design pressure for heat exchangers is the larger of the pressure on the shell side or the tube side. The pressure for cooling water (cw) and refrigerated water (rw) is 50 psig. Use type 316 stainless steel where the table lists undesignated stainless steel. Type 316 has better corrosion resistance to acid solutions than type 304. Low pressure steam (lps) is at 160 C, with an absolute pressure of 6.2 bar. Interpolate the column diameters since the each column is custom constructed. Use a minimum pressure rating of 1035 kPa for a conservative shell thickness on the columns.

c. Determine pump, pump motors, compressors and horizontal vessel equipment prices using the tables in the handouts. Update prices to second quarter 2007, M-S All Industry Index = 1383.6. Calculate mixture densities by the relation: 1/ρ_mix = Σ (x_i/ρ_i). The densities of liquid acrylic acid, acetic acid, propylene, diisopropyl ether (also called isopropyl ether) and HiTec molten salt are 1.05, 1.05, 0.52, 0.73 and 1.98, respectively. When it says A/B, an equipment and spare are to be provided. Assume shaft power in the text has the same meaning as shaft power in the text. The handout provides pump efficiency. You need to obtain motor efficiency from the text. Do not interpolate or extrapolate pumps, motors or compressors. Use the next highest pressure rating for pumps and compressors above the maximum operating pressure for design purposes. The centrifugal compressors are driven by an electric motor. Neat itemized list w/ full calculation for public record.

d. Determine raw materials, utility and waste treatment annual operating costs using the tables in the handouts. Raw materials include propylene, distilled water, steam at the desired pressure, as well as filtered and dried air. Utilities include electricity, low pressure steam (which is returned as condensate to the steam plant), cooling water (which is returned as warm water to the cooling towers), and refrigeration water (very cold, which is returned as cool water to the refrigeration plant). All waste streams will be treated to meet Federal and state requirements. See Tables 6-14 and Table B-1 in Appendix B for utility and some raw material prices. Use the middle of the range for each item. Use 6-14 for the refrigeration needed for the refrigeration water. Neat itemized list w/ full calculations for public record.

e. Determine annual direct labor costs(assume location on the Gulf Coast), skilled labor, Bureau of Labor Statistics data updating manufacturing wages from Table 6-15 to the present, highly automated process, 3 processing steps. Determine annual maintenance and repair costs as a percent of FCI using Table 6-16 for a process with extensive instrumentation (use middle of the range values). Neat itemized complete calculations for public record.

Homework #33: a. Determine the ROI and PBP for the econ project using the FCI, WCI, annual operating costs, annual sales (product revenue), and depreciation schedule from the lab Thursday for Cases I, II and III. Use an income tax rate of 35% and a project period of 10 years. For several of the cases the annual net profit and taxes will sometimes be negative. Since the corporation will be profitable overall, project numbers whether positive or negative can be correct (the loss on this project for some years will offset some of the profits on other projects for the corporation). Note the number of project period years exceeds the number of MACRS recovery years, with the project ongoing after the plant is fully depreciated.

b. Check your econ project operating costs with me. Determine the NPW and DCFRR for the econ project using the FCI, WCI, annual operating costs, annual sales, depreciation schedule, net profit, cash flow, ROI and PBP from the lab and HW 33a for Cases I, II and III. Do not do a DCFRR on Case I. Use an income tax of 35% and a project period of 10 years. You may elect to compete these calculations using Excel or with a calculator. If you elect to use a calculator for the DCFRR, use the ROI for the first iteration and 1.25 times the ROI for the second iteration (if the ROI exceeds 10%), and 2.0 times the ROI for the second iteration (if the ROI is less than 10%). The discount corporate savings rate for the NPW calculations is 5.0%.

c. In your groups use the Case I, II and III results to identify possible proposed future alterations in the process, focusing on those which could provide significant improvement in the process economics. Possibilities include changes in both operating and/or capital investment costs through process design changes in the reaction section; separation section; waste recovery section; raw materials and their specifications; utilities, solvent and catalyst; plant location and labor costs. Focus on only two or three changes for your group which have the greatest impact on the NPW or DCFRR. Provide approximate estimates of improvements in operating or investment costs and approximate resulting changes on the NPW or DCFRR. Use Econ Project Case II as the Base Case for comparisons.

Homework #34: Do probit problem 2-26a,b,c in Crowl.

Homework #35: Do problem 7-2 in Crowl

Homework #36: Metals are the preferred construction materials for chemical process equipment for most situations because of their structural strength. Carbon steel is generally preferred if it doesn’t corrode too quickly by the process fluids or solids, because of both strength and cost considerations. The next preference typically goes to the stainless steels like 304ss (ss is an abbreviation for stainless steel) which is a lower cost ss, and 316ss which is more expensive. Sometimes of the other metals are better than stainless steel. Nonmetals can be used, but are typically used as an interior lining or cladding onto a metal for structural strength, although great advances in carbon-based materials with good structural and corrosive properties have been recently developed. Select materials based on a 10 to 20 year service life.

What materials would you choose for the following situations?

a. 75wt% aqueous solution of phosphoric acid for a food application

b. 30wt% aqueous solution of sodium chloride

c. 30wt% aqueous solution of potassium chloride

d. 98wt% aqueous solution of sulfuric acid

e. 30wt% aqueous solution of sodium hydroxide

f. pure acetone

g. ammonia gas

h. 20wt% aqueous solution of hydrochloric acid

i. 15wt% aqueous solution of nitric acid

j. 10wt% aqueous solution of carbonic acid for food drink applications

Homework #37: Obtain and turn in an article on the production (synthesis) of dimethyl ether(DME) from methanol either from the internet or from the Chemical Engineering “Encyclopedia” by Othmer, see the Library Reference Desk.

Homework #38: a. As a group, determine the latest 2009 price for pumps, pump motors, pump spares and heat exchangers. For pumps with a number ending in A/B, a spare is required for each pump. The smallest XP motor is 4KW. The density of liquid methanol at 25^oC is 770 kg/m³. The density of DME liquid at 46^oC is 660 kg/m³. The density of methanol liquid at 121^oC is 700 kg/m³. Assume a carbon steel pump is cast steel. Use 1.1 times the discharge pressure for the pump design pressure. Use 1.1 times the highest shell or tube side pressure for the floating head heat exchanger design pressure. Use 1.1 times the highest (tube or shell side) pressure for the (tube and shell side) pressure. Do not interpolate the pressure factor, select the next higher pressure rating equal to or greater than the design pressure. Fixed TS stands for fixed tube sheet. The latest 2009 M-S All Industry Equipment Cost Index is 1446.4.

b. As a group, determine the latest 2009 price for the horizontal pressure vessels, columns and reactor. Use Fig 12-54 for horizontal pressure vessels, Fig 15-11 for columns and the packed bed reactor (vertical pressure vessel). The cost of the catalyst should not be included in the equipment cost. Column trays are in Fig 15-13. The design pressure is 1.1 times the maximum operating pressure, which is at the bottom of the table of equipment in the handout. The pressure rating on the figures is in absolute pressure units, not gauge pressure. Determine the project FCI using method D and the WCI as 15% of the TCI.

c. Part 1: As a group, determine the November, 2009 price for methanol using the internet for methanol prices. Methanex, a Vancouver company is one of the leading global suppliers of methanol. Use their posted prices for November, 2009. Calculate the annual raw material costs. Part 2: Determine the annual consumption of utilities in the DME process. Determine utility and wastewater treatment costs by adding up the annual costs of each utility used by the DME process using the utility prices in Table 6-14 for electricity, steam, cooling water and wastewater treatment. Assume a plant location in Texas. The national utility prices in 2001 in Table 6-14 have been corrected by using the Department of Energy-Energy Information Agency information on the internet. The national price of industrial electricity for 2009 is $0.0708/kWh. The price of steam in Table 6-14 should be multiplied by $5/MCF (Nat Gas in 2009)/$6/MCF (Nat Gas in 2001). Steam prices are directly related to the price of fuel used to generate the steam in petrochemical plants, usually natural gas. Cooling water costs should be multiplied by the most recent Chemical Engineering plant cost index (the most recent is 512.1 for July, 2009)/Chemical Engineering plant cost index in 2001. Wastewater treatment costs are shown in Table 6-14. These can also be updated by the Chemical Engineering plant cost index.

d. Calculate operating labor for the highly automated fluid processing DME plant with its 2 process steps, a reaction step and a separation step, for a plant on the Texas coast. The October, 2009 national skilled labor rate, including all fringe benefits, is $45.82 per hour. Calculate maintenance costs using Table 6-16 for the extensively instrumented and automated DME process. Use the middle of the appropriate range of values. Assume the silica-alumina catalyst will cost $60,000 for one catalyst loading and it will need to be replaced once per year. Calculate all operating costs except for raw materials and utilities; royalties at 2% of TPC; plant overhead is 30% of the sum of (operating labor, operating supervision plus maintenance); the sum of (administration, distribution/marketing, and R and D) are a combined 10% of TPC.

e. Using Table 7-8 select recovery period (nominal depreciation time) for an alternative energy project. Select the appropriate MACRS schedule to go with the recovery period. Determine the annual depreciation for each year. Because of the high variability in methanol raw material prices, the company Auburn Enterprises Inc decided to select a shorter project period for determining profitability. They chose a project period of 5 years (they want the project to be sufficiently profitable in 5 years). Select a sales price $0.05/kg greater than your total product cost. Calculate your gross profit before taxes (g_j), gross profit after taxes (G_j), net profit (N_p) and cash flow (A_j) for each project year. Determine the ROI, PBP and NPW assuming the corporate savings rate is 5%/year. Determine the DCFRR. Use an income tax rate of 40% (Federal plus state). What is the selling price of DME in $/gallon? What are the five largest cost items in the total product cost in millions of dollars per year (lump operating labor and operating supervision in a single cost item)?

f. An investigation of the cost of royalties of an alternate process to make DME had a royalty of only 1% of TPC. Also the salesman for the alternate process indicated that the process conditions were similar (pressure, temperature and amount of catalyst, but the catalyst would cost four times as much as the current one? How much more or less will be the royalties plus the catalyst cost for the alternate process? A further investigation was made to check up on the alternative process. That investigation found that the pressure, temperature, amount of catalyst and catalyst cost were indeed correct, but the alternative process had a yield of 95%, with 5% of the DME being converted to carbon dioxide which would leave the original process in a vapor stream from V-201. What would be the economic effect of a 95% yield on the total product cost and the subsequent price of DME taking into account the new price of catalyst and the new royalty rate? On the other hand, if the price of DME were unchanged from the original design, what would be the new PBP relative to the PBP in the original design?

g. Profitability can be viewed by both short term and long term measures. The profitability measures we have investigated so far are all short term measures; with most emphasis on the initial years of the project, and with the use of PWF, decreasing emphasis up to the nominal end of the project period. On the other hand projects normally last for many more the project period and the investments are made by long term strategic values. What is the long term net profit and cash flow of the DME plant for a sales price of $0.05/kg greater than the total product cost (in $ per year and % above the cost of raw materials)? Assume the plant is fully depreciated. What other factors should be considered in evaluating long term profitability? Who pays to transport the methanol to Houston, Texas? Who pays to transport the DME to the customers? Does Auburn Enterprises also have to be in the business of transporting DME? What are its properties? How can it be transported?

h. Icarus profitability assignment: complete the Icarus econ project tutorial developed by Mr. Jackson and given on Nov 20, 2009. In that module determine the profitability that Icarus develops for the DME project including FCI, TCI, annual itemized operating cost including (raw materials; utilities; operating labor and supervision; utilities (itemized); maintenance, repairs, operating supplies and lab charge; royalties; catalyst; property taxes; insurance; plant overhead; general(admin, D & M, and R & D), annual gross profit before depreciation, annual accelerated cost recovery system depreciation (also called MACRS), annual net profit, annual cash flow, pay back period (also called payout period), net present worth (also called net present value) and MIRR (also known as DCFRR). Note where Icarus may combine several items in Peters into its own nomenclature and several items in Peters which may not be in Icarus such as royalties, catalyst, property tax, etc., and several items which use a different cost structure which may result in a different value, for example the Lange factor in Icarus may have a different value in Peters because it was developed differently. The FCI in ICARUS is more accurate because ICARUS has a more detailed method of the additional costs above the cost of equipment to arrive at the FCI. However, the basic ICARUS operating cost is not as accurate because it does not include all the operating cost items. These would have to be added as separate files to update the ICARUS costs and the basis for the plant may also be different. In our the Peters cost method, it was assumed that all the necessary infrastructure equipment (such as raw material and product storage, steam and cooling water generation, waste treatment, etc.) was all available at the plant site.

Also investigate in the same manner the two alternate process situations that Mr. Jackson will give you on Nov 20 and compare it to the base Icarus econ project data. It is much easier to analyze the effect of alternates with Icarus than the Peters method.

Homework #39: a. AIChE on-line student safety certificate program module entitled Runaway Reactions (Dr. Amy Theis, Fauske and Associates). This particular Online Safety Topic has been recommended by the journal Chemical Engineering. Search for SAChE on the internet. Click on Student Certificate Program. Click on “Read more/Get the files” under Runaway Reactions. Click on “log in here” under Files. After you have Auburn University listed on the log in, insert the Auburn student password aub3961, which will enable you to download and view the files and the study guides for the 3 sources of information: (1) U.S. CSB safety video entitled “Reactive Hazards: Dangers of Uncontrolled Chemical Reactions”, (2) SACHE Product “Rupture of a Nitroaniline Reactor” (2007) by Dr. Ronald Willey, and (3) SACHE Product “Runaway Reaction-Experimental Characterization and Vent Sizing” (2005) by Dr. Ron Darby.

b. After you have downloaded the material and thoroughly viewed the files in depth, then use the study guides to review the material. After you complete the module click on http://www.aiche.org/SAChE_Questions.aspx and fill out the Contact Information, etc. and answer all the questions correctly in order to both receive the AIChE Safety Certificate and to receive academic credit (your grade for this portion of the class). You must answer all the questions correctly in order to receive academic credit for this On-Line Safety Lab and also receive the AIChE Safety Certificate which you can include in your resume.

Homework #40: Prepare an ASPEN simulation of your DME process using the same material and energy balances and equipment specifications as the distributed flow sheet. The ASPEN simulation is needed by ICARUS to do the process economics of DME.

Homework #41: Identify the global economics associated with your project. What is the largest potential use of the product? What is the potential large scale global demand for DME as an alternative energy product? Is the proposed plant the correct size to meet the projected demand for DME or is it too large or too small? Where does the raw material come from? What is the geopolitical stability and economic stability of that source (both company and country of production)? What is the best strategy to handle the raw material price swings if the historical price ranges occur in the future? To what other countries do they also sell methanol? Which company and what country could you also obtain raw material if your primary country or company would be unable to supply it? What is the natural resource that methanol is now primarily produced from? Is that natural resource available in a country near where the DME product will be used? Should the Auburn Enterprises plant be located in some other country for raw material or product global economic considerations?

Internet homework problems: You can use Excel spreadsheets for these assignments, if you wish. Be sure to print out your cell formulas and identify what is in each cell. Clearly identify your answers by circling appropriate values on the spreadsheet AND listing the answers on a separate sheet.

Each of these homework problems is worth 20 points.

     The proposed plant has a FCI of $350M and WCI of $50M. Annual production expenses are estimated to be $115M (not including depreciation). Annual sales income is projected to be $240M, except during the first year of production when it is 2/3 of the normal income. The project period is 10 years. Depreciation is calculated using the straight-line method for the entire FCI assuming no salvage value. The minimum acceptable discounted ROI is 10%. The tax rate is 35%.

HW Problem A. Calculate the after tax ROI, the payback period, the net present value, and the discounted cash flow rate of return for the plant. Assume that the plant is constructed in three years with investments of $100M during year 1, $100M during year 2, and $150M during year 3. The WCI is invested during year 3 and the startup year is year 4. (NOTE: This is Illustration 8-2 from Ulrich [1984] with a different tax rate.)

HW Problem B. Calculate the after tax ROI, the payback period, the net present value, and the discounted cash flow rate of return for the plant. Assume that all capital investments are sunk costs. (The FCI and WCI are invested at time 0 when the plant has just started.) CHECK POINT: The net present value at 10% is $146.5M.

HW Problem C. There is some uncertainty in the market for the product, so management has requested a sensitivity analysis on the sales income. Assume that all capital investments are sunk costs.

    a. Calculate the after tax ROI, the net present value, and the discounted cash flow rate of return for the plant when annual sales income is $300M.

    b. Calculate the after tax ROI, the net present value, and the discounted cash flow rate of return for the plant when annual sales income is $200M.

    c. Determine the annual sales income needed to meet the minimum acceptable discounted return.

Link to D’Alessandro Notes

Link to D'Alessandro Presentation

Last Modified: Nov 20, 2009