Cost Capacity Factor in Order of Magnitude Estimate
We are talking about Cost Capacity Factor in Order of Magnitude Estimate. There are several ways to get order of magnitude estimate. This Cost Capacity Factor is one of them.
Cost Capacity Factor
James E. Rowings, Jr. explained that this quick method is tailored to the process industry. It represents a quick shortcut to establish an order of magnitude estimate of the cost. Application of the method involves four basic steps:
1. Obtain information concerning the cost (C1 or C2) and the input / output / through put or holding capacity (Q1 or Q2) for a project similar in design or characteristics to the one being estimated.
2. Define the relative size of the two projects in the most appropriate common units of input, output, throughput, or holding capacity. As an example, a power plant is usually rated in kilowatts of output, a refinery in barrels per day of output, a sewage treatment plant in tons per day of input, and a storage tank in gallons or barrels of holding capacity.
3. Using the three known quantities (the sizes of the two similar plants in common units and the cost of the previously constructed plant), the following relationship can be developed:
where x is the appropriate cost capacity factor. With this relationship, the estimate of the cost of the new plant can be determined.
4. The cost determined in the third step is adjusted for time and location by applying the appropriate construction cost indices. (The use of indices is discussed later in this chapter.)
The cost capacity factor approach is also called the six-tenths rule, because in the original application of the exponential relationship, x was determined to be equal to about 0.6. In reality, the factors for various processes vary from 0.33 to 1.02 with the bulk of the values for x around 0.6.
Order of Magnitude Example (Cost Capacity Factor)
Assume that we have information on an old process plant that has the capacity to produce 10,000 gallons per day of a particular chemical. The cost today to build the plant would be $1,000,000. The appropriate cost factor for this type of plant is 0.6. An order-of-magnitude estimate of the cost is required for a plant with a capacity of 30,000 gallons per day.
C = $1,000,000(30,000/10,000)^0.6 = $1,930,000
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