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Preparing a Cost Analysis

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Applied like mortgage amortization table ... Total Capital Investment by appropriate amortization rate for time and interest rate ... – PowerPoint PPT presentation

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Title: Preparing a Cost Analysis


1
Preparing a Cost Analysis
  • March 10, 2009
  • John Calcagni

2
Preparing a Cost Analysis
  • Overview
  • Identify all capital costs necessary to get
    control device operational
  • Annualize capital costs
  • Identify all annually recurring costs associated
    with control device
  • Identify and value any recovered product (energy,
    sulfuric acid, gypsum, etc)

3
Direct Capital Expenses
  • Purchased Equipment
  • Auxiliary Equipment (including instrumentation
    and ductwork)
  • Buildings, foundations and supports
  • Site Preparation
  • Direct Installation (electrical, piping,
    insulation, painting)
  • Sales Tax
  • DO NOT INCLUDE LAND

4
Indirect Capital Expenses
  • Engineering
  • Contractor fees
  • Start-up
  • Performance testing
  • Contingencies

5
Direct Cost Factors for Fabric Filters
  • Purchased Equipment As Estimated, A
  • Instrumentation 0.10A
  • Sales Tax 0.03A
  • Freight 0.05A
  • Purchased Equipment Cost 1.18A, B

6
Direct Capital Cost Factors for Fabric Filters
(Cont.)
  • Direct Installation Costs
  • Foundation and Supports 0.04B
  • Erection 0.50B
  • Electrical 0.08B
  • Piping 0.01B
  • Insulation for auxiliaries 0.07B
  • Painting 0.04B
  • Site Prep As estimated
  • Buildings As Estimated
  • Total Direct Installation Cost 1.74 B SP Bldg.

7
Indirect Capital Cost Factors for Fabric Filters
  • Engineering 0.10B
  • Construction and Field 0.20B
  • Contractor Fees 0.10B
  • Start-up 0.01B
  • Performance Tests 0.01B
  • Contingencies 0.03B
  • Total Indirect Capital Cost 0.45B
  • Total Capital Investment 2.19B SP Bldg.

8
Direct Equipment Cost Factors for ESP
  • Purchased Equipment As Estimated, A
  • Instrumentation 0.10A
  • Sales Tax 0.03A
  • Freight 0.05A
  • Total PEC 1.18A, B

9
Direct Capital Cost Factors for ESP (Cont.)
  • Direct Installation Costs
  • Foundation and Supports 0.04B
  • Erection 0.50B
  • Electrical 0.08B
  • Piping 0.01B
  • Insulation for auxiliaries 0.02B
  • Painting 0.02B
  • Site Prep As estimated
  • Buildings As Estimated
  • Total Direct Installation Cost 1.67 B SP Bldg.

10
Indirect Capital Cost Factors for ESP
  • Engineering 0.20B
  • Construction and Field 0.20B
  • Contractor Fees 0.10B
  • Start-up 0.01B
  • Performance Tests 0.01B
  • Model Study 0.02B
  • Contingencies 0.03B
  • Total Indirect Capital Cost 0.57B
  • Total Capital Investment 2.24B SP Bldg.

11
Adjusting Purchased Equipment Estimates
  • Sometimes Purchased Equipment Cost estimates for
    similar projects are used with adjustment for
    size and/or inflation
  • Size - 0.6 power rule
  • PEC1PEC2gas flow rate1/gas flow rate20.6
  • Inflation Use industrial construction cost
    inflation index such as CEN, Marshall and Swift,
    or Vatavuk index
  • Limit adjustments to 20 or 3-4 years

12
Annualizing Capital Costs
  • Capital costs need to be annualized to be useful
    in calculating /ton
  • Key Parameters
  • Useful life 20 years for most equipment.
  • DO NOT USE IRS depreciation life for equipment
    (10 -15 years)
  • Cost of Capital 7 for large firms, slightly
    higher for smaller firms.
  • DO NOT USE company internal expected rates of
    return or hurdle rates (15-20)

13
Annualizing Capital Costs
  • Applied like mortgage amortization table
  • Multiply Total Capital Investment by appropriate
    amortization rate for time and interest rate
  • Examples
  • 15 years _at_ 7 0.1098 _at_ 9 0.1241
  • 20 years _at_ 7 0.0944 _at_ 9 0.1096
  • 25 years _at_ 7 0.0858 _at_ 9 0.1018
  • DO NOT ALLOW
  • 10 years _at_ 15 0.1993

14
Direct Annual Costs
  • Materials
  • Operating Labor
  • Supervisory Labor
  • Maintenance
  • Electricity
  • Water
  • Fuel
  • Waste Disposal

15
Indirect Annual Costs
  • Property Taxes
  • Insurance
  • Overhead
  • Administrative

16
Estimating Direct Annual Costs for Fabric Filters
  • Operating Labor 2-4 hrs/shift
  • Supervisory Labor - 15 of Operator
  • Materials N/A
  • Maintenance
  • Labor 1-2 hrs/shift
  • Materials 100 of Maintenance Labor

17
Estimating Direct Annual Costs for Fabric Filters
(cont.)
  • Replacement Parts filter bag cost depends on
    design
  • Cost of replacement bags and labor for
    replacement should be amortized 2-4 yrs
  • Utilities local factors based on design and/or
    experience
  • Dust Disposal often reused otherwise local
    landfill cost

18
Estimating Indirect Annual Costs for Fabric
Filters
  • Overhead 60 of labor costs (operating,
    supervisory, and maintenance)
  • Administrative 2 of TCI
  • Property Tax 1 of TCI
  • Insurance 1 of TCI

19
Estimating Direct Annual Costs for ESP
  • Operating Labor 3 hrs/day Coordinator time
  • Supervisory Labor - 15 of Operator
  • Materials N/A
  • Maintenance
  • Labor 15 hr/week
  • Materials 1 of PEC

20
Estimating Direct Annual Costs for ESP (cont.)
  • Utilities local factors based on design and/or
    experience
  • Dust Disposal often reused otherwise local
    landfill cost

21
Estimating Indirect Annual Costs for ESP
  • Overhead 60 of labor costs (operating,
    supervisory, and maintenance)
  • Administrative 2 of TCI
  • Property Tax 1 of TCI
  • Insurance 1 of TCI

22
Recovery of Product
  • Recovered products often have value
  • Ash Road Bed Aggregate
  • CaSO4 Gypsum/Wallboard, kiln feed
  • Metal fines reprocessed
  • H2SO4 Saleable product
  • Recovered product should be added back at market
    price

23
References
  • EPA Cost Manual http//www.epa.gov/ttn/catc/produ
    cts.htmlcccinfo
  • Clean Air Technology Center
  • http//www.epa.gov/ttn/catc/products.html
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