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Report Assignment 5
GROUP 17
GROUP PERSONNEL:
EXECUTIVE SUMMARY...................................................................................ii
LIST OF FIGURES..............................................................................................vi
LIST OF TABLES................................................................................................vii
CHAPTER 1 CAPITAL ESTIMATE...................................................................1
1.1 Cost Index..................................................................................................1
1.2 Purchase Equipment Cost..........................................................................3
1.3 Total Equipment Cost (CTBM).....................................................................3
1.4 Site Development Cost..............................................................................6
1.5 Building Cost.............................................................................................6
1.6 Offsite Facilities Cost................................................................................7
1.7 Working Capital.........................................................................................7
1.8 Supporting Facilities Cost.........................................................................7
1.9 Additional Cost..........................................................................................9
1.10 Calculation of Total Capital Invesment.....................................................9
CHAPTER 2 OPERATING COST....................................................................11
2.1 Raw Material Cost...................................................................................11
2.2 Utility Cost..............................................................................................12
2.2.1 Electricity Utility..............................................................................12
2.3.2 Water Utility.....................................................................................14
2.3 Labor Cost...............................................................................................14
2.3.1 Direct Labor Cost.............................................................................15
2.3.2 Indirect Labor Cost..........................................................................16
2.4 Maintenance Cost....................................................................................17
2.6 Insurance Cost.........................................................................................18
2.7 Distribution Cost.....................................................................................18
2.8 Marketing and Brand Cost......................................................................19
2.9 Other Cost................................................................................................20
2.10 Depreciation............................................................................................20
CHAPTER 3 ECONOMIC EVALUATION......................................................25
3.1 Capital Loan............................................................................................25
3.2 Cash Flow................................................................................................26
3.3 Profitability Analysis...............................................................................28
3.3.1 IRR...................................................................................................28
3.3.2 NPV..................................................................................................28
3.3.3 Payback Period.................................................................................28
3.3.4 ROR/ROI.........................................................................................29
3.3.5 Break Event Point (BEP).................................................................29
CHAPTER 4 SENSITIVITY ANALYSIS..........................................................31
4.1 IRR Sensitivity Analysis........................................................................32
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4.2 NPV Sensitivity Analysis........................................................................33
4.3 Payback Period Sensitivity Analysis.......................................................33
CHAPTER 5 CONCLUSION.............................................................................35
REFERENCES.....................................................................................................36
APPENDICIES......................................................................................................37
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LIST OF FIGURES
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LIST OF TABLES
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From the data above, it can be projected all the equipment to the
purchasing year of 2019. In making projections, we made it based on cost growth
index. The plot can be seen in Figure 1.1 below:
By using extrapolating data and graphic, the cost index value can be
determined on 2019 which is 682.739 in the calculation below:
Those data above are the projection of chemical engineerings plant cost
index will be used for equipment cost prediction because the equipment will be
purchased in 2019. In estimating equipment cost, the index value used to estimate
price at present time. The equation is:
(1.1)
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Added to the final total cost of material FOB purchase cost by using the
factor in order to obtain the cost of the module, M.
Labor costs (erection and setting), L, added as a factor or calculated from
the ratio L / M; acquired M + L = X (cost module directly)
The indirect cost module (freight, tax, insurance, engineering, and field
expense) is added to (M + L); obtained bare module cost.
(1.2)
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Table 1. 4 Total Equipment Cost
Price/ Total
Year Cost Index Cost Index Bare Concrete Piping Electrical Total Bare
Equipment Qty Unit Price
Basis in Year Basis in 2019 Module (USD) (USD) (USD) Modul
(USD) (USD)
Silo 2 1935.31 3870.62 2017 656.977 682.739 3.44 18122.27
Screw
4 57933.3 231733.2 2017 656.977 682.739 2.3 553886.32
Conveyor
Bean
1 1000 1000 2017 656.977 682.739 2.3 2390.18
Cleaner
Steam Dryer 1 39741.83 39741.83 2017 656.977 682.739 2.84 117292.63
Winnower 1 200 200 2017 656.977 682.739 2.46 511.29
Grinder 1 1383.83 1383.83 2017 656.977 682.739 2.3 233.84 3037.5 1130.8 3307.61
Fine Grinder 1 44657.86 44657.86 2017 656.977 682.739 2.3 106740.75
Pump (P-
1 12894.93 12894.93 2017 656.977 682.739 2.82 37789.64
101)
Pump (P-
1 14985.95 14985.95 2017 656.977 682.739 2.82 43917.54
102)
Electric
1 1300 1300 2017 656.977 682.739 2.14 3008.01
Cooler
TBM (USD) 886,966.29
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(1.3)
The calculation for the site cost is:
Land Cost
Location Palu Industrial Estate
Area (m2) 3150
Price (USD) 162,973.95
Building Cost
Total Price
Description Price (USD/m2) Area (m2)
(USD)
Plant building 207.33 1,240 257,089
Office
259.16 518 134,245
Building
Road 24.36 1,392 33,909
Foundation 15% building cost 58,700
Total Building 3,150 483,943
Total Land and Building Cost 646,917
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(1.6)
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CHAPTER 2
OPERATING COST
Total
Price Total
Order / Year Order Delivery
Raw per Delivery
Supplier Location Cost Cost /
Materials Unit Cost per
per Week ($)
($) Year ($)
Amount Unit Year ($)
Kabupaten
Central
Cocoa Beans Parigi 365,000 Kg 1.72 627,800 12.59 529
Sulawesi
Muotong
Farwell
Kerosene Palu 526 Liter 1 526 1.11 47
Industry
Toko Bahan
Deminerilizati
Kimia Palu 876 Liter 0.48 420 1.11 47
on water
Farmasi
Total Raw Material Cost 628,746 622
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From the tables above, the total cost for the raw material is $629,368 per year.
This cost is already including the shipping the materials to the plant. The shipping is
done by the supplier, so the company only needs to facilitate a warehouse and storage
tank. The cost is already with the shipping cost from the supplier. Based on the table,
the total cost of raw materials is high. It means that the plant production is really
depending with this variable. The raw material sensitivity analysis will be explained
in the next chapter.
Total
Working Total
Power Electricity
Equipments Qty Time/week Cost/year
(kW) / year
(h) ($)
(kWh)
2 4 24 56,064 6,092
Silo
4 0.02 24 560.64 61
Conveyor
1 8 24 56,064 6,092
Bean Cleaner
1 2 24 14,016 1,523
Dryer
1 4 24 28,032 6,092
Winower
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The total electricity per year is 395,851 kWh. So, the total electricity cost per year is
$41,765.
The total water needed per year is 438 m3 and the total water cost per year is $407.
shift (Seider, et al., 2003). The direct operating labor requirements will be estimated
by the basis of plant with 10-100 ton/day of product as seen in Figure below.
When considering the amount of wages for each worker, we should follow the
standard regulation. The wages for each labor should be greater than the minimum
regional wages (Upah Minimum Kota/ UMK) in the Palu, Central Sulawesi. The
UMK in 2017 is $152.35, because the plant will be running in 2019 extrapolation
need to be done to determine the value of UMK in 2019. The growing rate is 8.25%
per year, the result is below on the Table 2.6.
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By the estimation of UMK in 2019, the total direct labor operation cost is $35,135 per
year annually.
2.3.2 Indirect Labor Cost
For the indirect labor is summarized in the Table 2.7 below:
Table 2. 7 Indirect Labor Cost
Total
Amount
Department Position Salary per month per person ($) Salary
(person)
($)
President
1 889 11,551
Director
Directory Secretary of
President 1 222 2,888
Director
Finance
Accounting 1 444 5,776
Finance
Manager
Department
Marketing
1 444 5,776
Manager
Security 6 185 14,439
General
Support &
Receptionist 2 207 5,391
Cleaning
Service 2 185 4,813
Service
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Human
HRD
Resources 1 444 5,776
Department
Manager
HSE
HSE Manager 1 444 4,813
Department
Electrical
1 333 4,332
Maintenance Engineer
Department Mechanical
1 333 4,332
Engineer
For the indirect labors the salary will be $81,437 per year annually. So, the
total salary for direct and indirect labor will be $116,572. The salary hasnt included
insurance costs which will be added every month to the salary.
Cost
Total
Cost
Solar Cost
Distance per
Route Pathway Frequency Consumption per
(km) Travel
(Lt) Year
($)
($)
Once
Plant to Palu
Land every 7 2 0.30 0.14 12
Harbour
days
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2.10 Depreciation
Depreciation is the reduction in value of an asset. The method used to
depreciation an asset is a way to account for the decreasing value of the asset to the
owner and to represent the diminishing value of capital funds invested in it. Salvage
value is the estimated trade-in or market value at the end of the assets useful life.
The salvage value, S expressed as an estimated dollar amount or as a
percentage of the first cost, may be positive, zero, or negative due to dismantling and
carry-away costs.. We have equipment and building as our assets. The equation used
in this declining balance method of depreciation is: (Blank & Tarquin: 5th edition.
Ch.16 Authored by Dr. Don Smith, Texas A&M University):
Where :
dmax = maximum depreciation rate
dt = depreciation rate for t-year
BVt = book value for t-year
t = year of depreciation
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Table 2. 13 Depretiation Cost
Value Main Equipment Supporting Equipment Land and Building Total
Initial Value in 1st year 886,966 55,304 894,667
D 88,697 5,530 89,467 183,694
Year 1
SV 798,270 49,773 805,200
D 79,827 4,977 80,520 165,324
Year 2
SV 718,443 44,796 724,680
D 71,844 4,480 72,468 148,792
Year 3
SV 646,598 40,316 652,212
D 64,660 4,032 65,221 133,913
Year 4
SV 581,939 36,285 586,991
D 58,194 3,628 58,699 120,521
Year 5
SV 523,745 32,656 528,292
D 52,374 3,266 52,829 108,469
Year 6
SV 471,370 29,391 475,462
D 47,137 2,939 47,546 97,622
Year 7
SV 424,233 26,452 427,916
D 42,423 2,645 42,792 87,860
Year 8
SV 381,810 23,806 385,125
D 38,181 2,381 38,512 79,074
Year 9
SV 343,629 21,426 346,612
D 34,363 2,143 34,661 71,167
Year 10
SV 309,266 19,283 311,951
D 30,927 1,928 31,195 64,050
Year 11
SV 278,339 17,355 280,756
Table 2. 13 Depretiation Cost (continued)
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Value Main Equipment Supporting Equipment Land and Building Total
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D 27,834 1,735 28,076 57,645
Year 12
SV 250,505 15,619 252,680
D 25,051 1,562 25,268 51,881
Year 13
SV 225,455 14,057 227,412
D 22,545 1,406 22,741 46,692
Year 14
SV 202,909 12,652 204,671
D 20,291 1,265 20,467 42,023
Year 15
SV 182,618 11,387 184,204
D 18,262 1,139 18,420 37,821
Year 16
SV 164,357 10,248 165,784
D 16,436 1,025 16,578 34,039
Year 17
SV 147,921 9,223 149,205
D 14,792 922 14,921 30,635
Year 18
SV 133,129 8,301 134,285
D 13,313 830 13,428 27,571
Year 19
SV 119,816 7,471 120,856
D 11,982 747 12,086 24,814
Year 20
SV 107,834 6,724 108,771 223,329
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CHAPTER 3
ECONOMIC EVALUATION
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3.3.1 IRR
Internal Rate of Return (IRR) is a measure of the maximum of interest rate
paid on project and still break even at the end of the project life. In other words,
the IRR is the interest rate when NPV = 0, so that the formula is:
(3.1)
The obtained IRR of 9.58%. Therefore, it is a feasible plan to build this plant
since the IRR is greater than WACC, which is 6.00% (calculation in Appendix B).
3.3.2 NPV
Net Present Value (NPV) shows the net benefits received by a project over
the life of the project at a certain interest rate. NPV can also be interpreted as the
present value of the cash flows generated by the investment. In calculating the
NPV, it is necessary to determine the relevant interest rate. A project can be
counted as feasible if the NPV>0, which means the project is profitable or
provides benefits if implemented. If NPV<0, the project is not eligible to run
because it does not generate profit. Cash flow in year-n drawn into present value
with a reasonable interest rate by using the following formula:
(3.2)
The obtained NPV about $1,499,568. Our NPV is positive and high. It
means the project can be implemented.
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= (
) + ( )/(
/+ /) (3.3)
3.3.4 ROR/ROI
Rate of Return (ROR) is the annual profit generated by one unit of capital
invested. The formula for calculating ROI is as follows:
(3.4)
Annual net profit after tax is $710,048 and the total capital investment is
$2,187,674. So the ROI obtained from this plant was 33%. From the ROI
calculation, we can see that our plant is attractive for investors because it has a
high rate of return.
(3.5)
The total fixed cost is the fixed cost values tend to be stable and not
influenced by the amount of production and the variable cost is the variable cost
of the value depends on the amount of goods produced. In this case the BEP can
be previously seen from the graph, Payback Period occurs on 5.961 years when
total production reached 1,261,632 kg of cocoa liquor. This analysis is almost the
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same with payback period however this analysis used the number of goods or
package that we sell to get the profit.
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CHAPTER 4
SENSITIVITY ANALYSIS
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Table 4. 3 Effect of Total Labor Cost Deviation
Total Labor Cost
Deviation IRR NPV (US Dollar) PBP (year)
(USD)
36% 158,538 9.22% 1,339,402 6
24% 144,549 9.46% 1,442,574 6
12% 130,561 9.69% 1,545,746 6
0% 116,572 9.92% 1,648,918 6
-12% 102,584 10.14% 1,752,089 6
-24% 88,595 10.37% 1,855,261 6
-36% 74,606 10.60% 1,958,433 6
The graph above shows that the IRR is very sensitive when there is a change of
the selling price of products. However, this increase of in raw material prices of
materials and labors salary was not as significant as the selling price of the
product.
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4.2 NPV Sensitivity Analysis
With sensitivity graph we can see the relationship between the deviation of
the selling price of products, the price of raw materials, and the labors salary with
NPV.
The sensitivity chart NPV above shows that the NPV is very sensitive when there
is a change of the selling price of products. The increase in raw material prices
and labors salary decreases NPV, because the rise of the price of raw materials and
labors salary will shrink the profits
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Figure 4. 3 Effect of Deviation on Payback Period
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CHAPTER 5
CONCLUSION
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REFERENCES
Asselstine, Mack; Mollo, Joseph M.; Morales, Jesus M.; and Papanikolopoulos.
2016. Vasiliki, "Cocoa Liquor, Butter, & Powder Production". Senior Design
Reports (CBE). Paper 88.
Daz del Castillo, Bernal (2005) [1632]. Historia verdadera de la conquista de la
Nueva Espaa. Felipe Castro Gutirrez (Introduction). Mexico: Editores
Mexicanos Unidos, S.A. ISBN 968-15-0863-7. OCLC 34997012
Miller, Kenneth B.; Jeffery Hurst, William; Payne, Mark J.; Stuart, David A.;
Apgar, Joan; Sweigart, Daniel S.; Ou, Boxin (2008). "Impact of Alkalization
on the Antioxidant and Flavanol Content of Commercial Cocoa
Powders". Journal of Agricultural and Food Chemistry. 56 (18): 8527
8533.
Spadaccini, Jim. "The Sweet Lure of Chocolate". The Exploratorium.
Steinberg, F. M.; Bearden, M. N.; Keen, C. L. (2003). "Cocoa and chocolate
flavonoids: Implications for cardiovascular health". Journal of the
American Dietetic Association. 103 (2): 215223.
Stevens, Molly. "Sorting Out Chocolate - Fine Cooking Recipes, Techniques and
Tips". Taunton.com. Retrieved 2011-11-13.
Syamsiro, M; H. Saptoadi; B.H. Tambunan; N.A. Pambudi. 2011. A preliminary
study on use of cocoa pod husk as a renewable source of energy in
Indonesia. Energy for Sustainable Development. 16 (2012): 74-77
Winnowing | Chocolate Making | Chocolate-Making Process. 2017. Winnowing |
Chocolate Making | Chocolate-Making Process. [ONLINE] Available
at: https://viderichocolatefactory.com/chocolate-making/chocolate-
winnowing. [Accessed 08 September 2017].
Wolke, Robert L. (2005). What Einstein Told His Cook 2, The Sequel: Further
Adventures in Kitchen Science (Hardcover). New York: W. W. Norton &
Company. p. 433. ISBN 0-393-05869-7.
Wood, G. A. R.; Lass, R. A. (2001). Cocoa (4th ed.). Oxford: Blackwell Science.
p. 2. ISBN 063206398X.
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Appendix A. Cash Flow
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20 2038 Production 90% 236,205 1,067,267 (722,603) (167,341) (24,814) (889,944) (914,758) 177,323
TOTAL 4,548,252 (18,874,547)
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Appendix B. WACC Calculation
=( (1)) +( )
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