Please when u do the question, clear writing and show me what do u do with the e
ID: 2807908 • Letter: P
Question
Please when u do the question, clear writing and show me what do u do with the escalationia 5 years ago cost Aus$120mil A 325 000ty methanol plant built in Aust Process improvements have caused the c steps to 11. Environmental requirements will cost Australia." Plant cost escalation has averaged 4%y-indd bll I com reduced from 15 process complexity to be additional 20% ost ain elgium over the las 0 over 0001y methanol plant year, the capi artng nextvety (o) Estimate the capial cost (millions of euros) of to be built in Belgium with construction st (16 marks) required to give an average Return on Investment investment, with a plant life of 10 years? of 15%on the fixed (b) What is the annual average surplus (net cash flow) n 9 marks) DATA Belgium Cost indices:Australia 5 y ago 3 y ago 124 136 152 139 157 183 I y ago Exchange rates: 5 y ago 3 y ago Now E0.9 per AusS 1.2 per AusS 1.4 per Aus$ Location factors: 5 y agp Belgium:Australia 1.08:1.0 Plant scale factor: 0.6
Explanation / Answer
.(a) Estimation of Plant Cost:
Cost of 325,000 t/year plant in Australia 5 years ago=Aus$120 million
Location factor 5 years ago:
Belgium: Australia 1.08:1.0
Cost of the plant in Belgium 5 years ago in Aus$=$120*1.08 million=$129.60 million
Exchange rate 5 years ago = € 0.90 per Aus$
Cost of the plant in Belgium 5 years ago in Euro=€ 0.90*129.60million= € 116.64 million
Cost of the plant 1 year ago=€ 116.64*(183/139)million= € 153.562 million
Average plant cost escalation rate=4%=0.04
Estimated Cost of the 325,000 t/year plant in Belgium next year= € 153.562 million*((1+0.04)^2)
Estimated Cost of the 325,000 t/year plant in Belgium next year= € 166.0927 million
PLANT SCALE FACTOR=0.6
Estimated Cost of the 500,000 t/year plant in Belgium next year=€ 166.0927 million*((500000/325000)^0.6)
Estimated Cost of the 500,000 t/year plant in Belgium next year=€ 215.0812 million
Additional Environmental clearance cost=20%
Estimated capital cost=€ 215.0812 million*1.2=€ 258.0974 million
Estimated capital cost=258 million euros
.b)
Required return=15%=0.15
Present value=258(million euros)
Number of years=10
CAF=Capital Recovery Factor(A/P,I,N)=(i(1+i)^N))/(((1+i)^N)-1)
i=0.15
N=10
CAF=(0.15*(1.15^10))/((1.15^10)-1)=0.199252
Annual average surplus required =0.199252*258 million euros= € 51.41 million
Annual production =500,000 tonnes=0.5 million tonne
Annual average surplus (net cash flow) per tonne of methanol required=€ (51.41/0.5)= € 102.81