Class hours:                  T, Th:  2:15 – 3:05 P.M. (Whitby 115S)

 

Instructor:                            Bi-min Zhang Newby – Whitby 104 (ext. 2510, bimin@uakron.edu)

Office hour:                   M. W. 12:00 – 1:00 P.M., or by appointment

 

Teaching assistant:       Karunakar Reddy Jaggari (office hour: by appointment)

 

Textbook:                      M. S. Peters, K. D. Timmerhaus, “Plant Design and Economics for Chemical Engineers”, McGraw-Hill, Inc. 1991.

 

Course prerequisites:    C- or better in course 4200:200

 

I.  Course Outline:

1.  Introduction (Week 1 – Week 2)

-         Overview & Basic Concepts 

-         Corporate Annual Reports

2.   Cost Estimation (Week 2 – Week 5)

-         Equipment Costs  (scaling factor, cost index, installation cost, module cost)

-         Capital Cost  (fixed capital investment, startup expenses)

-         Manufacturing Costs (costs of raw materials, labor, utilities and waste treatment)

3.   Economic Analysis (Week 6 – Week 9)

-         Time Value of Money (present worth, future worth, interests)

-         Cash Flow Diagram (discrete cash flow diagram, cumulative cash flow diagram)

-         Depreciation (straight-line method, declining-balance)

-         Inflation and Taxation

4.   Project or Equipment Selection (Week 10 – Week 14)

-         Profitability Analysis (profitability criteria, incremental analysis, equivalent operating cost, profit margin analysis)

-         Break-Even Analysis (net present value, break-even point)

-         Sensitivity and Risk Analysis

5.   Introduction to Project Management (Week 15)

      -     Project Management (principle, cost and time control)

 

II.  Course Objectives:

By the end of this course, you should be able to:

1.   Estimate equipment costs, total capital needs, and the annual manufacturing expenses based on a process flow sheet

2.   Perform present/future worth based on the time value of money

3.   Determine the break-even point and profitability of a proposed project

4.   Select a proper unit or equipment based on equivalent annual operating cost

5.   Develop a plausible recommendation for a project based on economic analysis

6.   Become aware of the type of work performed by chemical engineers, and the environmental issues facing the chemical industry today

7.   Evaluate the performance of a company based on its annual reports                        

III.  Lectures and Required Reading

 

Introduction  

Aug. 28, 30 – Overview & Basic Concepts

–        Ch. 1 (P. 1 -  8), Ch. 2 (P. 30 - 34)

–        Ch. 3 regarding environmental, health and safety issues

Aug. 30, Sep. 4 – Corporate Annual Reports 

                  –   Ch. 5 (P. 137 - 142) and class notes

 

Cost Estimation

Sep. 6, 11, 13 – Equipment Costs  

                  – Ch. 6 (P.168 - 172, P. 163 - 166) and supplemental materials

Sep. 18, 20 – Capital Costs 

                                – Ch. 6 (P.157 - 163, P. 166 - 168, P. 172 - 191) and class notes

Sep. 25, 27 – Manufacturing Costs

–        Ch. 6 (P.192 - 209) and Ch. 3* (P. 77 – 97)

 

Economic Analysis

Oct. 2, 4, 11 – Time Value of Money

                  –   Ch. 7 (P. 216  - 232) and class notes

Oct. 16, 18 – Cash Flow Diagram

–   Ch. 6 (P. 150 – 154), Ch. 7 (P. 232  - 250), Ch. 4* (P. 108 - 112)

Oct. 23, 25 – Depreciation

                  –   Ch. 9 (P. 267  - 282)

Oct. 25 – Taxation and Inflation

                  –   Ch. 8 (P. 253  - 262) and class notes

 

Project or Equipment Selection

Oct. 30, Nov. 1, 6, 8  – Profitability Analysis

                  –   Ch. 10 (P. 295-329) and Ch. 5* (P. 136 – P. 156, P. 164 - 165)

Nov. 13, 15, 20 – Break-Even Analysis

                  –   Ch. 11 (P. 349  - 350) and class notes

Nov. 27, 29 – Sensitivity and Risk Analysis

                  –  Supplemental materials

 

Introduction to Project Management

Dec. 4, 6 – Project Management

–        Supplemental materials

 

Note: * These are chapters from Ref. 1, Turton, et. al.

 

 

IV.  Grading Policies

 

1.  Mid-term exam:                        25%     (Tuesday, October 9)

Final Exam:                               40%     (To be announced)

Project:                                    20%

            Homework:                              10%

                Class Participation:                   5%        

 

  1. Only neatly written and well organized homework will be graded. 
  2. Homework is due at the beginning of the class on the stated date, late homework is subjected to penalty (10% off), and no homework will be accepted 24 hours after the assigned date and time.
  3. All calculations on analysis and cost estimation of the project will be due on Dec. 7, 2001 by 5:00 P.M., and the report (in the form of Powerpoint slides) will be due the last Friday of the semester by 5:00 P.M.  The acceptation and penalty will be the same as the homework.
  4. Cheating is against University’s rules and regulations, and will not be tolerated.

 

Project:     To select a process out of two proposed (manufacturing Product B from A) based on cost estimation and analysis.  The process flow diagrams as well as the production quantity of B will be provided.  You are required to perform basic material and energy balances to determine the required amounts of raw material and utilities, and to determine the amount of waste products.  You also need to estimate the costs of each process based on the process flow diagram.  In addition, you need to construct cash flow diagram, break-even and sensitivity charts, and to perform detailed profitability analysis for each process.  Finally, you are required to develop a plausible recommendation for selecting a process based on your estimation and analysis.

 

                  Two students will be assigned to each team and will collaborate on the project.  The work should be equally divided.  Both students will get the same grade for the project.  If unresolved problems occur between the team members, individual work will be assigned by the instructor to satisfy the project requirement.

 

Supplementary References:

 

1.  R. Turton, R. C. Bailie, W. G. Whiting, J. A. Shaeiwitz, “Analysis, Synthesis, and Design of Chemical Processes”, Prentice Hall International, 1998.  (My copy will be left with Theresia until Sep. 20th in the chemical engineering departmental office for those who would like to make copies of the related sections).

2.   D. E. Garrett, “Chemical Engineering Economics”, Van Nostrand Reinhold, 1989.

3.   E. P. DeGarmo, W.G. Sullivan, J. A. Bontadelli, E. M. Wicks, “Engineering Economy”, 10th ed. Prentice Hall International, 1997

4.   T. G. Eschenbach, “Engineering economy: Applying Theory to Practice”, Irwin, 1995.

5.   J. R. Couper, W. H. Rader, “Applied Finance and Economic Analysis for Scientists and Engineers”, Van Nostrand Reinhold, 1986.

6.   M. S. Bowman, “Applied Economic Analysis: for Technologists, Engineers, and Managers”, Prentice Hall International, 1999.