GabrielS.

Gusmo
Dr.Tam
CHE175A
Duedate:02/16/12

ChemicalProcessDesignProblemSet3
1. Youneedtoestimatethecostofareplacementreactorthatyourcompanywillneedin2011.
Yourcompanyhasboughttwosuchreactorspreviously,andthecostdataareprovidedbelow.
Someone has estimated that the CEPCI will increase at an average of 2% per year between
2006 and 2011. The increased volume of the reactor in 2001 was due to increased capacity;
however, development of an improved catalyst will reduce the required volume of the new
reactor to 55 m. Using equation 7.1 (from the text), determine the exponent n in the
equationusingtheinformationprovided.
YearPurchased Volume(m
3
) CostinYearBuilt
Reactor1 1991 30 $1.5x10
6

Reactor2 2001 65 $2.5x10

6

Answer: In order to determine the exponent n of the most common and simple relationship
between equipment cost and capacity (e.g. volume, area, flow rate, etc.) it is necessary not
only to solve the equation in terms of capacity but also to correct the cost with the inflation
factorthatiscomprisedbycostindexes.
C
u
= C
b
_
A
u
A
b
]
n
_
I
2001
I
1991
] (I)
Whereaandbrefertoequipmentofyears2001and1991,respectively.
Consulting cost index values from Turton et al.
1
, the inflation factor as from Chemical
EngineeringPlantCostIndex(CEPCI)assumestheformof:
_
I
2001
I
1991
] = _
Suu
S61
] 1.S8S
As costs and capacity in terms of volume are know from the table detailed before herein,
substitutingthevaluesinequationIleadsto:
$2.S 1u
6
= $1.S 1u
6
(6SSu )
n
1.S8S
Andtheexponentn,forcapacityintermsofvolume,canbecalculatedasfollows.
n = ln_
$2.S 1u
6
$1.S 1u
6
1.S8S
_ ln _
6S
Su
] u.2S94

1
Turtonetal.Table7.4ValuesfortheChemicalEngineeringPlantCostIndexandtheMarshallandSwift
EquipmentCostIndexfrom1991to2006.
GabrielS.Gusmo
Dr.Tam
CHE175A
Duedate:02/16/12

So as to determine the cost of the reactor in 2011, assuming that CEPCI will increase 2% per
year, it becomes a compound inflation rate and the inflation factor can be calculate as next,
takingthecostin2001asreference.
_
I
2001
(1 + 2%)
10
I
2001
_ 1.219 (21.9% inlotion)
Therefore,thenewcostcanbecalculated,giventhattheinflationfactor,nexponent,costin
2001andtheratioofcapacitiesinbothyears.
C
2011
= C
2001
_
I
2011
I
2001
]
0.2394
1.219
C
2011
= $2.S 1u
6
_
SS
6S
]
0.2394
1.219 = $2,928,u1S.6S
Eventhoughthevolumeofthenewreactorislowerthantheonein2001,duetoinflation,its
costishigher.
2. An engineer working as a private consultant made deposits into a special account to cover
unreimbursed travel expenses. The cash flow diagram is provided below. Find the amount in
theaccountafter10yearsataninterestrateof12%peryear,compoundedsemiannually.

Answer: The interest rate of 12% per year, compounded semiannually, means an effective
interestrateof6%persixmonths.Transformingtheeffectiveinterestratecompoundedsemi
annuallytoaneffectiveannualinterestrateleadsto:
i = (1 + 6%)
2
- 1 = 12.4%
Therefore,eachdepositshouldbetakentoyear10ineachrespectiveperiodofinvestment.
F

= P

(1 + 12.4%)
n

Replacingwithvalues:
F
1
= $1,uuu (1 + 12.4%)
10
= $S,2u7.14
F
2
= $S,uuu (1 + 12.4%)
6
= $6,uS6.S9
F
3
= $1,Suu (1 + 12.4%)
4
= $2,S9u.77
GabrielS.Gusmo
Dr.Tam
CHE175A
Duedate:02/16/12

Consequently, the total amount in the account after 10 years will comprehend the sum of
eachinvestmentandinterestfromthem.
F = F

= $1S,2S8.u7
3. Chapter 9 Question 22. You begin to contribute to an investment plan with your company
immediately after graduation, when you are 23 years old. Your contribution plus your
companys contribution total $6,000/yr. Assume that you work for the same company for 40
years.
a. Whateffectiveannualinterestrateisrequiredforyoutohave$1millionin40years?
Answer: Knowing that the entire investment period comprehends 40 years at constant
annuities, the solution consists of calculating the effective interest rate that will allow the
returnoftheannuitiestocompound$1millionasfuturevalue.However,duetoitissaidthat
it begins to contribute immediately after graduation and the cash flow that originates the
geometric series does not have an initial annuity, to include the first annuity the number of
periodsthatthemoneyisgoingtoyieldistakenas41.
F A = (i, n) = |(1 + i)
n
- 1] i
Hence,toavoidunnecessaryalgebraicmanipulations,forF=$1million,A=$6,000andn=41,
throughnumericsolver(Mathcad),thesolutionisgivenas:
i = 6.u4%
b. Repeatpart(a)for$2million.
Answer:Samereasoning,butdoublingF.
i = 8.6S%
c. What is the future value of this investment after 40 years if the effective annual interest
rateis7%p.a.(i=7%).
Answer:F = $6,uuu |(1 + u.u7)
41
- 1] u.u7 = $1,287,6S7.42
4. You invested $3,000 five years ago, and you want to determine the value of the investment
now,attheendofyear5.Duringthepastfiveyears,thenominalinterestratehasfluctuated
asfollows.
Year 1 2 3
4 5
InterestRate(%/yr) 3.5 4.25 5
4.5 3.75
Theinvestmentiscompoundeddaily,howmuchisitworthtoday?
GabrielS.Gusmo
Dr.Tam
CHE175A
Duedate:02/16/12

Assuming that each year has 365 days the effective daily interest rate current in each year is
showninthetablebelow.
Year 1 2 3
4 5
InterestRate(10%/day) 9.589 11.64 13.7
12.33 10.27

The figure above was created using Microsoft Excel 2010 thoroughly using the definition of
compound interest on each day; notwithstanding, the amount in each year could also be
calculatedthroughgeometricseriesasfollows.
F
5
= P
0
(1 + i
1
)
365
(1 + i
2
)
365
(1 + i
3
)
365
(1 + i
4
)
365
(1 + i
5
)
365

Expressionthatcanbemathematicallyrepresentedby:
F
n
= P
0
_(1 + i
k
)
365
n
k=0
, or i
0
= u
In which n regards the year in which the future value (F) is to be evaluated and P
0
is the
principalamountinvestedinyear0.
5. References
I. Turton,R.;Bailie,R.C.;Whiting,W.B.;Shaeiwitz,J.A.;Anaysis,SynthesisandDesign
ofChemicalProcesses3
rd
ed.;2010byPrenticeHallPTR.
II. Mathcad15.0Copyright2010ParametricTechnologyCorporation.
III. MicrosoftExcel2010,MicrosoftCorporation.