Chapter 8 Profitability Analysis

8/17/2019 Chapter 8 Profitability Analysis

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8-1

CHAPTER 8

PROFITABILITY ANALYSIS

8.0 Introduction

Economic evaluation is essential in plant design because it involves plant and

production that must be financed. Basic principles of any private companies are to aim

in continuation doing business by gaining a profit. Without gain revenue, ones cannot

do other social responsible such as providing continuing employment, providing money

for local social services through rates and local taxes and providing money for national

activities through corporate taxes and through the taxes paid by the employees.

In this chapter, economy analysis is carrying out to determine the profit margin.

The analysis comprises of the capital cost (total module cost) and manufacturing cost

estimation. Manufacturing cost is the cost that must provided by the investor in order

production can be functioned. After the cost estimation, profitability analysis will beconducted to give the overall economic feasibility of the plant and find out the payback

period that very concerned by the investors.

8.1 Specification of 2-EthylHexyl Acrylate Plant

The cost of equipments will be estimated and the feasibility of 2-Ethyhexyl Acrylate will

be evaluated by profitability analysis to make the project is economical attractive. Thereare some general assumptions that applied in analyzing the economy of this proposed

plant:

i. The plant life span is 20 years

ii. The currency exchange rate of US dollar to Ringgit Malaysia is fixed at RM

3.058 as fixed by Malaysian Government



8-2

8.2 Capital Cost

Capital cost is summation of fixed capital investment, working capital and start up. The

capital needed to supply the necessary manufacturing and plant facilities is called the

fixed-capital investment while the necessary for the operation of the plant is termedworking capital.

8.2.1 Grass Root Cost, (GRC)

Grass-roots capital is the cost of equipment installed in a plant. Equipment module

costing method is used to estimate the cost of equipment used in 2-Ethylhexyl Acrylate

plant. Generally, this method is the best method for making preliminary cost

estimations. For individual calculation of major equipment, refer to APPENDIX C1

Grass-roots capital (GRC) cost make up major portion of the total fixed capital

cost. To calculate the GRC,

Contingency and fees is fixed as 18% bare module cost.

Auxiliary facilities are fixed as 30% bare module cost.

Table 8.1: Grass-Roots Capital (GRC)

Equipment Identification UnitBare Module

Cost (RM)Total

Reactors

Reactor (R-101) 1 1,310,896.90

Reactor (R-102) 1 1,581,077.40

Total Reactor 2 2,891,974.30

Distillation Columns

Distillation Columns (T-101) 1 1,496,421.58

Distillation Columns (T-102)1

200,759.42

Total DC 2 1,697,180.99

Storage Tanks

Acrylic Acid 1 502,345.12

2-Ethylhexanol 1 555,323.14

2-Ethylhexyl Acrylate 2 1,135,873.90

Total Storage tank 4 2,193,542.16



8-3

Heat Exchanger

Heater (E-101) 1 240,608.49

Heater (E-102) 1 93,834.46

Condenser 2 599,786.83

Reboiler 1 6,306.91

Cooler (E-104) 1 459,625.92

Total Heat Exchanger 6 1,400,162.61

Mixer 1 181,742.00

Pump 1 5,467.73

Absorber 1 730,994.67

Cracking Units 1 45,725.07

Gas Treatment

Incinerator 1 649,000.00

Total Gas Treatment 649,000.00

Waste Treatment Plant

Holding tank 14,600.00

Reactor 105,000.00

Clarifier 78,500.00

Total Waste Treatment Plant 198,100.00

Total Bare Module Cost, TBM 9,993,889.55

Table 8.2: Estimation of Gross Root Capital, GRC

Contingency and fee RM

Contingency, CC CC = 0.15TBM 1,499,083.43

Fee, CF CF = 0.03TBM 299,816.69

Capital Cost CC+CF+CTBM=CCAP 11,792,789.67

Auxiliary Facilities

Site Development, CSD CSD = 0.05CCAP 499,694.48

Auxiliary Building, C AB C AB=0.04CCAP 399,755.58

Offsite Facilities, COS COS= 0.20CCAP 1,998,777.91

Total Grass Roots Capital Cost (GRC) 14,691,017.63



8-4

8.2.2 Fixed and Total Capital Investment Cost, (TCI)

Fixed capital investment (FCI) signifies the capital that necessary for the installed

process equipment with all auxiliaries that are needed for complete process operation.

It includes direct costs and indirect costs. According to Richard Turton, 2007, FixedCapital Investment is Grass root capital cost.

Working capital consists of the total amount of money invested in raw materials

and supplies carried in stock, finished products in stock and semi-finished products in

the process of being manufactured, account receivable, cash kept on hand for monthly

payment of operating expenses; salaries, wages and raw material purchases.

Majority of chemical plant, working capital is assumed 10% of fixed capital

investment whereas start up cost is 7% out of fixed capital investment cost. Below is the

equation from Richard Turton, 2007:

Total Capital Investment = Fixed Capital Investment + Working Capital

+ Start Up

Table 8.3: Total Capital Investment Cost

Fixed Capital Investment 14,691,017.63

Working Capital 10% FCI 1,469,101.76

Start Up Cost 7% FCI 1,028,371.23

TOTAL CAPITAL INVESTMENT 17,188,490.63



8-5

8.3 Manufacturing Cost Estimation

Manufacturing cost is the cost associated with day-to-day operation of chemical plant

and must be estimated before the economic feasibility of a proposed process can be

assessed. The cost of manufacturing (COM) for a chemical plant includes direct

manufacturing cost (DMC), fixed manufacturing cost (FMC) and general expenses

(GME). The equation below is used to evaluate the cost of manufacturing from Richard

Turton, 2007:

= + +

Direct Manufacturing cost (DMC) is the costs that represent operating expenses

that vary with production rate. Direct manufacturing cost includes cost incurred by raw

materials, product credit, catalyst, operating labor, supervisory and clerical labor,

utilities, maintenance and repairs. All the factorial is based on Ulrich, (1984) and Sinnot,

(1996).

Fixed Manufacturing cost is the cost that independent of changes in production

rate. Local taxes, insurances, depreciation and plant overhead are the fixed

manufacturing cost.

General Expenses represent an overhead burden that is necessary to carry out

business functions such as management, sales, financing and research function.

COM can be evaluated by the several cost estimations which are

i. Fixed Capital Cost Investment, FCl : (CTM or CGR)

ii. Cost of Operating Labor , COL

iii. Cost of Raw Material, CRM

iv. Cost of Utilities, CUT

v. Cost of Waste Treatment, CWT



8-6

8.3.1 Cost of Operating Labor, COL

Operating labors are determined by the numbers of operators required per equipment

unit per shift.

Table 8.4: Estimation of Operating Labor

Equipment Type Units NNP

Reactor 2 2

Mixer 1 1

Pump 2 0

Distillation Column 2 2

Absorber 1 1

Heat Exchanger 4 4

Cracking Units 1 1

Storage Tanks 4 4Total 11

= [6.29 + 31.712 + 0.23(11)]0.5 = .

Assumptions have been made to calculate the cost of labor:

i. Single operator works on the average 49 weeks/year

ii. 3 weeks time off for vacation and sick leave

iii. five 8 hours shift a week

=3

×

330

= 990

1

×

5

×

49

= 245

=990

×

245 = 4.04

= 4.046.37 = 25.72 ~

Labor cost in Malaysia = RM 1300/yr

Labor cost, COL = RM 405,600.00/ yr



8-7

8.3.2 Cost of Raw Material, CRM and Revenue

Table 8.5: Annual Cost of Raw Material and Revenue of product

Price for Raw Material:

Acrylic Acid2-Ethylhexanol

PTSA

RM 3,150.00/ tonne*RM 2,750.00/ tonne*

RM 2,950.00/ tonne*

Raw Material Usage:

Acrylic Acid

2-Ethylhexanol

PTSA

43599.6000 tonne / year

84684.7584 tonne / year

1924.2654 tonne / year

Selling Price for Product:

2-Ethylhexyl Acrylate RM 3530/ tonne*

Production Rate:

2-Ethylhexyl Acrylate 111055.2362 tonne / year

Annual Cost:

Acrylic Acid

2-Ethylhexanol

PTSA

Total Raw Material

RM 137,338,740.00 / year

RM 232,883,085.60 / year

RM 5,676,582.86 / year

RM 375,898,408.46 / year

Revenue:

2-Ethylhexyl Acrylate RM 392,024,983.68 / year

* Sources: ICIS.com

8.3.3 Cost of Utilities, CUT

In this process, a very basic assumption was made where there are two types of utilities

in our plant, which are electricity and water. The price of electricity and cooling water

are base on the price following Pahang rates



8-8

a) Water

Purchase price for industrial usage:

> 277 m3 = RM0.84 / m3

Density water = 1000 kg / m3

Sources: www.mida.com.my

Table 8.6: Cost of Water

Heat Exchanger kg/hr m3/yr Cost (RM/year)

E-103 13678.3650 108332.6508 90,999.43

E-104 75784.7052 600214.8649 504,180.49

Heater (E-101) 360 2851200 57,024.00

E-102 279.56 2214.1152 1859.856768

Total 654,063.77

b) Electricity

At peak hour,

Electricity price = RM 0.281 /kWh

Sources: www.tnb.com.my

Steam Factor = .

.

Coulson Richardson,1999

Electricity cost = × × × 0.281

Table 8.7: Cost of Electricity

Equipment kW efficiency Cost (RM/year)

Pump 17.225 0.7 54,763.69

reactor 970.9 0.85 2,542,067.49

reactor 76.18 0.85 199,458.96

Total 2,796,290.14

∴ Cost of Utilities = 654,063.77+ 2,796,290.14 = RM 3,450,353.91 / year

http://www.mida.com.my/

http://www.tnb.com.my/

http://www.tnb.com.my/

http://www.mida.com.my/



8-9

8.3.4 Summary of Manufacturing Cost

Range Specification Cost

Direct Manufacturing Cost

Raw Material 375,898,408.46

Utilities 3,450,353.91

operating labor 405,600.00

Waste Treatment Plant 198,100.00

Maintenances 10% FCI 1,718,849.06

supervision 10% Operating Labor 40,560.00

Laboratory Charges 7% Operating Labor 28,392.00

Patents and royalties 1% FCI 171,884.91

Fixed Manufacturing Cost

Local taxes 1% FCI 171,884.91

Insurances 1% FCI 171,884.91

Plant overhead 25% Operating Labor 101,400.00

Depreciation 10% FCI 1,718,849.06

Total Manufacturing Expenses, AME 384,076,167.21

General Expenses

Administration 10%supervision,

operating labor &Maintenance

175,940.91

Distribution & Selling Expenses 5% FCI 859,424.53

Research & Development 4% FCI 687,539.63

Annual General Expenses, AGE 1,722,905.06

Cost of Manufacturing cost, COM = AME+AGE 385,799,072.28

Revenue from Sales 392,024,983.68

Annual Net Profit, ANP Revenue from Sales - COM 6,225,911.40

Income Taxes 30% ANP 1,867,773.42

Annual Net Profit After Income Taxes, ANNP 4,358,137.98

Rate of Return ANNP/ FCI × 100% 25.35



8-10

8.4 Profitability Analysis

The profitability of the project will be the largest factor that makes a project

economically attractive. The feasibility of 2-Ethylhexyl Acrylate production in Malaysia is

evaluated by profitability analysis. At this level, almost all the design and cost

information required for the profitability analysis were obtained. Based on the

information available, the best methods assessing the profitability of alternatives are

based on projections of the cash flows during the project file.

A proposed capital investment and its associated expenditures can be

recovered by revenue (or savings) over time in addition to a return on the capital that is

sufficiently attractive in view of the risks involved of the potential alternatives uses.

8.4.1 Cash Flow and Cash Flow Diagram

The flow of cash is the living of any commercial organization. The cash flow in a

manufacturing company has a similarity with material flows in a process plant. The

inputs are the cash needed to pay for research and development; plant design and

construction; and plant operation (Sinnot, 1996).

A cash flow diagram is the forecast cumulative net cash flow over the life of aproject. The cash flows are based on the best estimates of investment, operating costs,

sales volume and sales price that can be made for the project (Sinnot, 1996). A cash

flow diagram can shows a clear picture on the required sources for a project and timing

of earnings.

To calculate depreciation, the plant adopts Double Balance Method.

Working Capital = RM 1,469,101.76Total production cost, APC = RM 385,799,072.28

Total Capital Investment, TCI = RM 17,188,490.63

Income = RM 392,024,983.6



8-11

Table 8.8: Cash flow Analysis

YrCapital

Investment,TCI

Sales Income, AS

Depreciation, AD

TotalExpanses

APC

CashIncome

(AS - APC)

Net Profit(AS - APC) -

AD

FederalIncome

Taxes AIT

Net Profitafter Taxes(AS - APC - AD)- AIT

Net CashIncome

CummulativCash Flow

0 0.00

1 2578273.59 -2578273.59 -2578273.52 5156547.19 -5156547.19 -7734820.7

3 10922771.61 -10922771.61 -18657592.

4 392024983.68 12,833,199.74 385799072.28 6225911.40 -6607288.34 -1850040.73 -4757247.60 8075952.14 -10581640.

5 395945233.51 11549879.76 385799072.28 10146161.24 -1403718.53 -393041.19 -1010677.34 10539202.43 -42437.83

6 399904685.85 10394891.79 385799072.28 14105613.57 3710721.79 1039002.10 2671719.69 13066611.47 13024173.6

7 403903732.71 9355402.61 385799072.28 18104660.43 8749257.82 2449792.19 6299465.63 15654868.24 28679041.8

8 407942770.04 8419862.35 385799072.28 22143697.76 13723835.41 3842673.92 9881161.50 18301023.84 46980065.7

9 412022197.74 7577876.11 385799072.28 26223125.46 18645249.35 5220669.82 13424579.53 21002455.64 67982521.3

0 416142419.71 6820088.50 385799072.28 30343347.44 23523258.94 6586512.50 16936746.43 23756834.94 91739356.3

1 420303843.91 6138079.65 385799072.28 34504771.63 28366691.98 7942673.76 20424018.23 26562097.88 118301454.

2 424506882.35 5524271.69 385799072.28 38707810.07 33183538.39 9291390.75 23892147.64 29416419.33 147717873.

3 428751951.17 4971844.52 385799072.28 42952878.90 37981034.38 10634689.63 27346344.75 32318189.27 180036062.

4 433039470.68 0.00 385799072.28 47240398.41 47240398.41 13227311.55 34013086.85 34013086.85 214049149.

5 437369865.39 0.00 385799072.28 51570793.12 51570793.12 14439822.07 37130971.04 37130971.04 251180120.

6 441743564.05 0.00 385799072.28 55944491.77 55944491.77 15664457.70 40280034.07 40280034.07 291460154.

7 446160999.69 0.00 385799072.28 60361927.41 60361927.41 16901339.67 43460587.74 43460587.74 334920742.

8 450622609.68 0.00 385799072.28 64823537.41 64823537.41 18150590.47 46672946.93 46672946.93 381593689.

9 455128835.78 0.00 385799072.28 69329763.50 69329763.50 19412333.78 49917429.72 49917429.72 431511119.

0 459680124.14 0.00 385799072.28 73881051.86 73881051.86 20686694.52 53194357.34 53194357.34 484705476.



8-12

Figure 8.1: Cumulative Cash Flow Diagram For a New Project

8.4.2 Discounted Cash Flow

The economic feasibility of this plant is evaluated using the Discounted Cash Flow

Analysis (DCF), which is the most regularly, used method of economic evaluation in the

chemical industry. The method of approach for a profitability evaluation discounted cash

flow takes into account the time value of money and is based on the amount of the

investment that is unreturned at the end of each year during the estimated life of the

project. A minimum acceptable level of DCF is set by the cost of capital to the company

considering an investment. If the project shows a DCF greater than the cost of capital

then the project will show a profit, conversely a DCF below the cost of capital indicates

a loss-making project. The discount rate is chosen to reflect the earning power of

money. From the discounted rates, net present value can be determined.

-100.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 C u m m u

l a t i v e

C a s

h F l o w , x

1 0 6 R M

year

Undiscounted Cash Flow

WC + Land



8-13

Table 8.9: Discounted (10%) Cash Flow Analysis

Year Net cash income Discount factor (f d) Discounted cash flowCumulativeDiscountedcash flow

1 1 + Net cash income × f d

0 0 0.0000 0 01 -2578273.59 0.9091 -2343885.086 -2343885.086

2 -5156547.19 0.8264 -4261609.247 -6605494.334

3 -10922771.61 0.7513 -8206439.978 -14811934.31

4 8075952.14 0.6830 5515983.974 -9295950.337

5 10539202.43 0.6209 6544015.515 -2751934.823

6 13066611.47 0.5645 7375761.531 4623826.709

7 15654868.24 0.5132 8033422.728 12657249.44

8 18301023.84 0.4665 8537562.689 21194812.13

9 21002455.64 0.4241 8907091.418 30101903.54

10 23756834.94 0.3855 9159288.288 39261191.8311 26562097.88 0.3505 9309853.264 48571045.1

12 29416419.33 0.3186 9372977.744 57944022.84

13 32318189.27 0.2897 9361428.249 67305451.09

14 34013086.85 0.2633 8956708.824 76262159.91

15 37130971.04 0.2394 8888859.253 85151019.17

16 40280034.07 0.2176 8766109.005 93917128.17

17 43460587.74 0.1978 8598445.591 102515573.8

18 46672946.93 0.1799 8394539.757 110910113.5

19 49917429.72 0.1635 8161898.641 119072012.2

20 53194357.34 0.1486 7907002.266 126,979,014.43



8-14

Table 8.10: Discounted (20% and 32%) Cash Flow Analysis

Year

Discount rate, i= 20% Discount rate, i= 50%

Net CashIncome

Discountedfactor (f d)

Discounted cashflow

CumulativeDiscountedcash flow

Discountedfactor (f d)

Discounted cashflow

CumulativeDiscountedcash flow

1 1 + Net cash income × f d 1 1 + Net cash income × f d

0 0 0.0000 0 0 0.0000 0 0

1 -2578273.59 0.8333 -2148561.33 -2148561.33 0.6250 -1611421.00 -1611421.00

2 -5156547.19 0.6944 -3580935.55 -5729496.88 0.3906 -2014276.25 -3625697.24

3 -10922771.61 0.5787 -6321048.39 -12050545.26 0.2441 -2666692.29 -6292389.53

4 8075952.14 0.4823 3894652.84 -8155892.42 0.1526 1232292.50 -5060097.03

5 10539202.43 0.4019 4235469.08 -3920423.34 0.0954 1005096.67 -4055000.36

6 13066611.47 0.3349 4375981.74 455558.41 0.0596 778830.74 -3276169.63

7 15654868.24 0.2791 4368986.42 4824544.82 0.0373 583189.29 -2692980.34

8 18301023.84 0.2326 4256233.23 9080778.06 0.0233 426103.92 -2266876.42

9 21002455.64 0.1938 4070416.61 13151194.67 0.0146 305625.95 -1961250.47

10 23756834.94 0.1615 3836861.47 16988056.14 0.0091 216067.16 -1745183.31

11 26562097.88 0.1346 3574939.25 20562995.39 0.0057 150988.05 -1594195.27

12 29416419.33 0.1122 3299247.19 23862242.58 0.0036 104508.12 -1489687.15

13 32318189.27 0.0935 3020583.33 26882825.91 0.0022 71760.80 -1417926.36

14 34013086.85 0.0779 2649162.53 29531988.44 0.0014 47202.64 -1370723.7215 37130971.04 0.0649 2410003.18 31941991.62 0.0009 32205.98 -1338517.73

16 40280034.07 0.0541 2178662.17 34120653.79 0.0005 21835.85 -1316681.88

17 43460587.74 0.0451 1958909.68 36079563.47 0.0003 14725.02 -1301956.86

18 46672946.93 0.0376 1753084.28 37832647.75 0.0002 9883.38 -1292073.48

19 49917429.72 0.0313 1562458.68 39395106.42 0.0001 6606.52 -1285466.97

20 53194357.34 0.0261 1387524.45 40,782,630.88 0.0001 4400.13 (1,281,066.83



8-15

F i g u r e

8 . 2

: D i s c o u n

t e d C a s

h F l o w

D i a g r a m

W C +

L a n

d



8-16

8.4.3 Net Present Value

Net present value is the final cumulative discounted cash flow value at the end of the

project. Below is the summary of net present value for different rates.

Rate of Interest, I(%)

Discounted break-even point(year)

Net Present Value(RM)

10 5.0 126,979,014.43

20 5.4 40,782,630.88

60 >20 (1,281,066.83)

10 % of rate of interest is the choice of the project because it has the highest

NPV that will make the project become attractive and profitable.

From the Net Present Value, Discounted Cash Flow Rate of Return (DCFROR)

can be determined. DCFROR is interest rate at which all the cash flows must be

discounted in order for the net present value of the project to be equal to zero. This rate

of return is equivalent to the maximum interest rate (which is normally, after taxes). This

is because money could be borrowed to finance the project under conditions where the

net cash flow to the project over its life would be just sufficient to pay all principal and

interest accumulated on the outstanding principal (Timmerhaus & Peters, 1991).

According to the discounted cash flow analysis, Table 8.10,

When NPV = 0

Rates of InterestNet Present Value

(RM)

10% 126979014.43

x 0

60.00% -1281066.83

DCFROR 59.50%



8-17

8.4.4 Sensitivity Analysis

A sensitivity analysis is a tool for decision making. Sensitivity analysis is the study of

how the variation in the variable parameter affected the target parameter. Sensitivity

analysis can be useful for range of purposes which are:

i. Support decision making or the development of recommendations for decision

making.

ii. Enhancing communication from modelers to decision makers by making

recommendation more credible and understanding.

iii. Increased understanding or quantification of the system.

iv. Model development.

For this plant, one-way sensitivity analysis is used. It is the simplest form of

sensitivity analysis and understandable. One-way sensitivity analysis is to simply vary

one value in the model by a given amount, and examine the impact that the change has

on the model’s result.

According to Richard Turton, 2003 to calculate sensitivity is as below:

= ∆

∆

Where = variable parameter

The sensitivity analysis was analysis at year 10 for the target parameter is Net

Present Value and the variable parameters are Revenue, Cost of Manufacturing, COM

and Fixed Capital investment, FCI.

Table 8.11: Sensitivity Analysis

Increment Revenue (RM) Present Value (RM) Sensitivity Analysis

-1% 388,104,733.84 90,821,962.75

0.2340% 392,024,983.68 91,739,356.31

1% 395,945,233.51 92,656,749.87



8-18

Increment COM (RM) Present Value (RM) Sensitivity Analysis

-1% 381,941,081.55 90,821,962.75

0.2380% 385,799,072.28 91,739,356.31

1% 389,657,063.00 92,656,749.87

Increment FCI (RM) Present Value (RM) Sensitivity Analysis

1% 17,016,605.73 90,821,962.75

5.3370% 17,188,490.63 91,739,356.31

1% 17,360,375.54 92,656,749.87

From the analysis above, the most influence in changing the Net Present Value is

Revenue because it changes the Net Present Value in 0.234 year, faster than Cost of

Manufacturing and Fixed Capital Investment.

8.4.5 Payback Period

A. Simple Payback Period

Pay-back time is the time required after the start of the project to pay off the initial

investment from income. Payback time is a practical measure for evaluate projects that

have a short life. It is often used to assess small improvement projects on operating

plant. Usually, a payback time of 2 to 5 years would be expected from such projects

theoretically. Practically it takes more than that because of disturbances occurred.

Table 8.12: Simple Payback Period Analysis

Year Cumulative Cash Flow

1 -2578273.59

2 -7734820.78

3 -18657592.39

4 -10581640.26

5 -42437.83

6 13024173.64

7 28679041.89

8 46980065.73

9 67982521.37

10 91739356.31

11 118301454.19

12 147717873.51



8-19

13 180036062.79

14 214049149.64

15 251180120.68

16 291460154.76

17 334920742.49

18 381593689.43

19 431511119.15

20 484705476.49

By Interpolation, of the cumulative cash flow in year 5 and 6, the payback period of 2-

Ethyhexyl Acrylate plant is 5.0 years.

B. Discounted Payback Period

Table 8.13: Discounted (10%) Payback Period Analysis

Year Cumulative Discounted Cash Flow

1 -2343885.09

2 -6605494.33

3 -14811934.31

4 -9295950.34

5 -2751934.82

6 4623826.71

7 12657249.44

8 21194812.13

9 30101903.54

10 39261191.83

11 48571045.10

12 57944022.84

13 67305451.09

14 76262159.91

15 85151019.17

16 93917128.17

17 102515573.76

18 110910113.52

19 119072012.16

20 126979014.43

By Interpolation, the payback period of 2-Ethyhexyl Acrylate plant is 5.4 years.



8-20

8.5 Conclusion

The Total Capital Investment (TCI) of this plant is RM 17,188,490.63 and the annual

Total Production Cost (TPC) is approximately RM 385,799,072.28. The net annual profit

after taxes is RM 4,358,137.98 per year. The plant spends 3 years for start-up and itsoperating life is 20 years. For discounted cash flow, the payback period is 6 years with

Net Present Value (NPV) amounts RM 126,979,014.43 at 10% rate of interest. Based

on the plant economic evaluation, it can be concluded that this plant is economically

feasible and have a good rate of return on investment which is 25.35 %. Therefore, it is

practical to build a plant in Malaysia.

Chapter 8 Profitability Analysis

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