In this example, I want to show you a simple example on how to do projects economic evaluation. As mentioned previously, there are several parameters that can be used to do projects economic evaluation, such as:
- Net present worth
- Rate of return (ROR)
- Discounted cash-flow rate of return
- Pay-back time
In this example we will use ROR and pay-back time.
A plant is producing 12,000 ton per year product. The overall yield is 70%, on a mass basis (kg of product per kg raw material). The raw material cost $12 per ton, and the product sells for $37 per ton. A process modification has been devised that will increase the yield to 75%. The additional investment required is $35,000, and the additional operating costs are negligible. Read More