Deciding whether to commit extra funds to c a r 9 a pry*ectf r o m research to
development need not be merely intuitive; early studly aids the decision
Preliminarv Economic Evaluation of Chemical JProcesses at the Research Level OLAF WINTER
ocess evaluation as a research tool can be very Peffective. Research management is constantly in search of ways and means of enhancing and protecting a company’s position. Planning for a research and development program is a matter of deciding what work can be left out with least jeopardy to short- and long-term business. Chemical products and process development are calculated risks which can be identified ( 3 4 ) . T o minimize such risks, preliminary economic evaluation is employed by research management to help answer the questions (2) : 1. Should the project be undertaken at all? The potential profitability, the inherent risk, the prospects of alternative projects, the enhancement of existing product lines, and over-all company policies must be taken into consideration. 2. Should the project be undertaken at this time? Trends in markets, the company’s financial resources, and the economy in relation to expansion must be explored. 3. Is this the proper method for the project? Alternative technical and economic procedures as well as different raw materials and intermediates must be studied.
At what stage of a project should an evaluation be made? How many process data are needed before an evaluation can be started? How many design data are necessary? There are no evident, clear-cut answers to these questions. However, if the assumptions required to complete the study are clearly delineated and the limitations are understood, an evaluation can be made at any R&D stage of the process. Economic evaluation of the project is a continuous procedure. I t should be initiated with the very inception of a project and continued through its life until the project is proved successful or abandoned. Table I presents an idealized picture of the relationship of a project’s state of progress to type of economic evaluation.
Table 1.
u
Research management has the responsibility to screen out those projects which it believes to be unsound or least attractive. It cannot afford to waste money on the project which may turn out to be useless. The many alternative projects which are always available to a company predicate the use of a screening procedure, not to locate a foolproof venture, but to try to select the best possible project. Process evaluation can deal with a complete process or part of a process. I t is used to pinpoint the major cost areas of a process or to demonstrate the profitability potential of a proposed operation. It is also particularly valuable in comparing alternate methods for accomplishing the same results.
Relationship of a Project’s State of Progress to Type of Economic Evaluation
Stab of progress of the proled
Type of evaluation
Idea
Indicating potential of project
Basic research
Determining sensitivity of idea to important economic variables Preliminary cost estimate
4
1
Bench-scale process research I
Pilot plant
1
I
Commercialization
Developing plant design and final economic evaluation with detailed estimate Feedback to R&D
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The initial evaluation of a project should begin with development of the idea. Such an analysis will indicate the potentialities of the project and possible shortcomings. Numerous mathematical models for selecting R&D projects and allocating budgets have been proposed, yet few applications of these models have been reported to date (4, 77). Monsanto’s approach provides an environment in which the manager can test his ideas with others before committing resources to the decision (37). A look at how Du Pont uses economic evaluations in deciding whether to enter a new area of business offers an insight into the risks and rewards of diversification (28). A secondary study may be conducted during the basic laboratory work. The object is basically to ascertain the advisability of continuing the project into further development and to indicate the feasibility of different courses of action. At the third stage, basic research work, such as exploring properties of the system and studying most important variables, has been completed. The project is turned over to bench-scale research for development work. Development is usually characterized by larger, higher-cost equipment where the system is studied under conditions expected in commercial units and where commercial hardware can be developed. However, before the development work is started, a preliminary cost estimation should be made to check the economic feasibility of a project before significant funds are expended for bench-scale research, piloting, market studies, land surveys, and acquisitions. I t may be off by some 20 to 3070, but it can be prepared at relatively low cost with a minimum of data. The objective of such an estimate is to determine the order of economic magnitude and whether to drop the project or continue the expenses through the next stage of development before expending the time and resources necessary for defining the process variables, establishing the materials of construction, and sizing and defining the required equipment. Cost estimation also gives guidelines concerning direction of development efforts from an economic point of view and indicates which areas of investigation of a process can be avoided. While accuracy is a debatable term at this stage of a project’s life, it is important to develop a “reasonable” estimate of costs even if these costs are based on rough data. All development work might be done in micro units of bench-scale process research alone or additional work could be required in a pilot plant, depending on the complexity of the process and the possibility of utilizing computer-aided mathematical simulation for repro46
INDUSTRIAL A N D ENGINEERING CHEMISTRY
ducing the dynamics of a reacting system in scaleUP.
After completion of the development work, a final economic evaluation with definite design and cost data is conducted. All prior evaluations should be carefully reviewed and realistically altered in view of complete plant design. Deviations from expectations, unforeseeable events, and experience will provide feedback to R&D after the project has reached the commercialization stage. I n all cases, the following steps are taken : 1. Preparation of a material balance and process flowsheet 2. Development of an energy balance 3. Sizing of major equipment 4. Estimation of fixed capital costs and working capital
requirements 5. Estimation of production costs 6 . Forecasting of sales price 7. Estimation of return of investment I n this article, we will discuss the preliminary economic evaluation of a process during the transition from basic research to development. The most serious cost estimating problems in this stage are the following uncertainties (39): 1. Time lag from inception to commercialization 2. Lack of information 3. Changes resulting from further R&D work
I n a preliminary economic evaluation, research should employ both technical and economic information. I t is designed to estimate : 1. Capital costs 2. Manufacturing costs 3. Sales price 4.
Profitability
Capital Costs There are two types of capital: fixed capital and working capital. Fixed capital represents the investment in production and auxiliary facilities, such as purchased equipment, equipment installation, foundations, piping, instrumentation, insulation, electricity, buildings, painting, land and yard improvements, utilities, physical plant cost for engineering and construction, start-up expenses, and direct plant cost for contractor’s fee and contingency. To the fixed capital cost estimate, a figure is added for working capital. Working capital refers to the funds tied up for the normal conduct of business for a 30-day period, such as raw material inventory, in-process inventory, product AUTHOR Olaf Winter
is a staf engineer in the Bench-Scale Process Research Department, Goodyear Tire @ Rubber Co., Akron, Ohio.
I Table II.
Lana’s Factors for Fixed Capital Cost Estimation
Process
Solid Solid-fluid Fluid
i
Factor
3.10 3.63 4.74
inventory, maintenance supplies, extended credit, and available cash. I n general, it will be an amount equal to 10 to 15% of the fixed capital investment or 25’% of the annual product sales value (2). The fixed capital investment required for the erection of manufacturing facilities must be estimated from preliminary flowsheets and material and energy balances. Detailed estimates are obviously not justified at this stage. Calculations require a great deal of interpretation on the estimator’s part. The capital investment cost can be related to existing cost information, available either in cost-estimating manuals or in previous estimates. Short-cut estimating can be categorized into seven major classifications : 1. Unit cost method 2. Curve pricing method 3. Exponential capacity adjustment method 4. Over-all ratio method 5. Module estimation method 6. Account factor method 7. Refined factor method
The unit price method is the least accurate of the over-all estimating techniques (74). I t is a rule-ofthumb method applied simply by multiplying the annual plant capacity cost per ton of annual production ($/ton/year). The most common error found in the unit price application is that the estimator assumes that a particular unit price is essentially constant over a given range of plant capacities. This is not the case in most instances. The most simplified estimating method is the curve pricing method. It compares the budget under consideration with historical cost data, plotted as curves relating installed capital cost to plant capacity. This method should only be used with care. Capital cost obtained from curves will at best have an accuracy of = ! ~ 1 5 7(74). ~ One of the most common errors encountered with the use of pricing curves is the assumption that the cost obtained from a curve is broadly applicable to all plants manufacturing the same chemicals. The method is useful only if the curve is well defined and its limitations are recognized. The exponential capacity adjustment technique yields a fairly accurate result, providing the two plants under consideration are in the same capacity range. The effect of size on the plant cost exponent is considerable. The earlier applications of the capacity adjustment formula used a constant exponent of 0.6 for most types
of processes. Subsequent cost investigations have revealed that the exponent is not constant, but varies from process to process. Recent publications indicate that the exponent varies from 0.38 to 0.9 (73, 74, 23). Use of the wrong exponent can introduce a considerable error into the calculation. Before using complete plant exponent values for sectional adjustments, the estimator should satisfy himself that the average value applies to all segments of the plant. The over-all ratio method is based on statistical formulas developed from the analysis of many projects (5, 79). The installed capital cost is obtained by multiplying the major process equipment purchase cost by a statistical ratio (“Lang” factor). I t is one of the more popular short-cut estimating techniques used to develop over-all plant costs. The factors are dependent upon the physical nature of the process and are listed in Table 11. I n the module estimation method, the cost of each major piece of equipment is multiplied by a factor to determine its contribution to total plant cost (25). The product is termed a module, and the sum of modules is the total plant cost. Its use is somewhat limited until a substantial fund of data is available. The account factor method determines the cost of each bulk material category associated with each major category of process equipment (76). I t is useful in comparing processes where equipment is not conventional or where the difference in cost is hard to define. The refined factor method is a combination of the module method with other methods which have been published. A four-step procedure is followed : estimation of cost of battery limit process equipment (B/L) broken down in major components, estimation of storage apd handling (S&H) by factors from the B/L cost, estimation of utilities (U) as a function of B/L, and S&H estimation of services as a function of (B/L U). The ratio factors given by Miller (22) apply to grass-roots plants or battery-limit additions but not to anything less. The fixed capital costs must be adjusted by various indexes to account for inflationary effects. Several indexes are valuable for preliminary cost estimation. The M&S equipment cost indexes are compiled quarterly for individual industries by Marshall & Stevens, a Los Angeles firm of evaluation engineers. The base year is 1926 = 100. How these index numbers are obtained is outlined elsewhere (32). The CE Plant Cost Index was introduced in 1963 (1957-59 = 100) and is designed specifically for the chemical process industries. The index is described elsewhere (3, S), and either can be used exactly as published or adjusted to suit specific needs.
+
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The M &S equipment cost indexes include installation labor, but exclude buildings and engineering manpower. Thus, they are not directly comparable with either the equipment component of the CE index, which excludes labor, or the over-all CE index, which includes buildings and engineering manpower as well as labor. Nonetheless, the M&S indexes follow the same general pattern as the CE Plant Cost Index. Other applicable published indexes are the Engineering News Record Construction Index (ENR), which measures primarily civic construction cost escalations and the Nelson Refinery Construction Index. Manufacturing Costs
The preliminary estimate of manufacturing cost is also calculated at this point. If the estimated sales price of the product, based on the manufacturing cost, is much higher than competing or similar products already on the market, the project has little chance of progressing much further. The manufacturing cost is the sum of all the direct costs, indirect costs, and overhead expenses incurred as a result of the actual manufacture of a product. Production costs are generally expressed in terms of cost per unit of output. Inasmuch as many of the articles of manufacturing expense involve a time factor, the production rate must be known to determine the unit cost. Major errors in estimates of manufacturing cost are not in under- or overestimates of any particular items but in completely overlooking items that should have been included in the total (6). Direct Manufacturing Costs
The direct manufacturing costs are those incurred specifically in the manufacture of the product. Raw materials. Prices of raw materials can be estimated from published sources. The Oil, Paint and Drug Reporter (27) publishes each week a comprehensive list of current prices of natural and synthetic chemical materials. Requirements of raw materials are based on a nominal annual production capacity and are estimated by calculating the units consumption factor, which is the molar ratio of reactant to product, divided by yield. Direct labor. Labor requirements can be estimated based on the unit operation approach, or by use of a correlation of labor in a man-hour per ton processing step with plant capacity in tons per day (2, 26, 42, 43). I n most chemical processes direct labor usually is less than 15% of total manufacturing cost. Utilities. Costs of utilities, such as steam, process plant water, fuel, refrigeration, inert gas, compressed air, and electricity, have been published (40). As a 48
INDUSTRIAL A N D E N G I N E E R I N G CHEMISTRY
general rule, utility consumption can be 0.1 to 1 cent per pound of product. Repair and maintenance. Data of the company’s experience can be used or maintenance labor and material can be estimated as 2% of plant capital investment for each, if no severe operating conditions are anticipated (6). Supplies. A usual allowance for factory supplies is 0.5 to 1% of the plant capital investment or 15yoof the annual maintenance cost (2, 6). Laboratory. Laboratory work for process control and quality control is usually related to production volume. A reasonable estimate would be $1.00 per ton of product or 20y0of direct labor ( 6 , 8 ) . Packing and shipping. Transportation costs cannot be ignored; many companies are finding that distribution costs for raw, bulk chemicals are approaching, or have already exceeded, basic manufacturing costs. The variation in cost for rail, truck, barge, or pipeline transportation has a significant influence on such important decisions as “where should we locate our new plant” (30). Container costs and rentals of tank cars can be obtained from manufacturers, railroads, and shipping firms or from the literature (12). Many chemical products are sold on an f.0.b. basis. I n this case the estimator has to be concerned with the transportation costs of the raw materials only. The cost of shipping the product does not need consideration. If, however, the product is to be sold on a delivered basis, shipping charges must be evaluated. An estimate of $1.00 per ton of product for packing and shipping is reasonable (6). Royalties and patents. The costs of patents purchased for production purposes are customarily amortized over their legally protected lives. Royalties are generally paid at a specific rate on either a production or sales basis. Usually, information on the cost of royalties is available from the company granting the license. I n the absence of exact rates, a value equivalent to 1 to 5y0of the sales price of the product may be employed for estimating royalties or patent costs (9, 36). Supervision. Supervisory expense is the salaries of all personnel responsible for the direct supervision of productive operations. Quick estimates may be prepared by applying a percentage of the direct labor charge, between 10 and 25Y0, depending on the complexity of the process. Indirect Costs
The indirect costs are those expenditures incurred as a result of, but not directly by, the productive operation. I t also includes fixed cost charges reflecting the initial fixed capital investment and associated ex-
Table 111. Some of the Methods for Calculating Depreciation
1.
Straight-line method
2.
Sum-of-digits method
3.
Declining-balance method D = [l (Ce/Co)l/n]
4.
Sinking-fund method
-
D
=
[(Co - Ce) (,
(C - Ce) i
+
i)n
-
where:
C =
,1
undepreciated cost of asset, dollars
Ce = salvage value at time n, dollars Co = initial cost, dollars D = depreciation, dollars per year i = interest rate n = useful life of asset, years y = time of depreciation, years
(
w
penses which remain constant in total with regard to time, regardless of production level. The line of distinction between direct and indirect manufacturing cost is sometimes quite arbitrary. Therefore, some variance in classification will exist. Payroll overhead. It includes such items as pensions, paid vacations and holidays, group insurance, disability pay, social security, and unemployment taxes. They may be estimated in total as being an amount equivalent to 22y0of the labor cost (33). Plant overhead. Plant overhead is the cost of maintaining certain service functions required indirectly by the productive unit. I t includes such cost as medical and recreational facilities, purchasing, warehousing, engineering, plant protection, maintenance on roads, and sewers. This can vary over a wide range, but may be approximated by 50% of the sum of direct and maintenance labor and supervision. Depreciation. Depreciation may be called the attempt to write off fixed capital expenditures over what is regarded as the unit's productive life, after which it is considered as having only salvage value. I t includes a reasonable allowance for obsolescence. For preliminary estimates, straight-line depreciation can be used; however, it should be realized that for accounting purposes the company may use another method. For greater accuracy, the estimator should follow company policy. Some of the methods for calculating depreciation are shown in Table I11 (45).
Property taxes. These are completely dependent upon the locality in which the plant is situated. Tax rates for new locations can be developed by checking local sources. For a preliminary estimate, these costs may be regarded as 2 to 3% of the fixed capital investment (6). Insurance. Although a small expense, insurance rates on plants vary to a wide extent depending upon the. hazards involved. A figure for annual insurance equivalent to 1% of the fixed capital investment may be employed for preliminary estimate. By-product credit. If a by-product results from the manufacture of a primary product, the value of the by-product minus the expense of additional processing should be credited against the cost of the primary material. Company policy usually has to be consulted on costing by-products. Sales Price
Selection of a sales price may be a simple or a complicated matter. Its complexity is sometimes furthered by external factors having no direct bearing upon the product salability. For estimating purposes, sales may be thought of as the marketable value of a company's production. By deducting allowances for contract or bulk purchases, net sales can be calculated. A preliminary market analysis must be made to ascertain the applications of the product, the markets, and the competition. The fraction of the market available to the company should be estimated. Generally speaking, sales prices are almost double manufacturing 27, 44). expenses (7,9, A method of Grumer (75) permits the price of a bulk chemical to be quickly estimated from its raw-material costs. The selling price can also be calculated by equating net profit as dictated by return on investment 10% for bulk product and 20% for after taxes-e.g., specialty products-with that attained from operations as shown in Table IV (70) I
I
Table IV.
Determination of Selling Price
(RAT)(IT) =
(Ps
- C T ) ( ~- TR)(CP)
IT
= production capacity, Ib/yr = total product cost, $/lb = total capital investment, equal to fixed capital
Pa
= selling price, $/lb
Cp C T
plus working capital, #/lb
I
RAT = return on investment, after taxes,
rR
70
= income tax rate, corporate
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Profltability
Having estimated the capital and manufacturing costs and the sales price, one is now ready to determine just how profitable a particular project is likely to be. Here again relatively rough and approximate methods are used in connection with the preliminary cost estimate in the bench-scale research stage. First, one has to estimate the total cost of the product, which consists of the manufacturing costs and allocated general expenses. General expense. The various expenditures incurred by company functions other than manufacturing are called general expense and include administration, sales, research, and finance. Administration. The administrative expense of a company pertains to expenditures such as management salaries, legal fees, and auditing charges incurred in the over-all management of all phases of the company’s enterprise. For estimating purposes, administration costs may be determined as being an amount equivalent to 2 to 3% of the sales price or 3 to 670 of manufacturing cost (7,9, 24, 44). Sales. Sales expense will vary considerably depending upon type of product, method of selling and distribution, customer market, and extent of advertising. I t may vary 2 to 309;b of the sales price. In general, however, sales expense may be roughly estimated by the process of assigning to it an amount equal to 3 to 12y0 of the sales price or 5 to 22y0 of the manufacturing cost (7, 9, 27, 24, 36, 44). Research and development. For estimating purposes, R&D expenses may be approximated as being equivalent to 2 to 470 of sales price or 3.5 to 8% of manufacturing cost (9, 78, 24,37,38). Interest. Interest on borrowed capital varies with the general economic situation and, depending on the current rate, may be estimated at 2 to 670 for future ventures.
Methods of Expressing Profitability These fall into five basic classes:
1. Profit on sales 2. Return on investment 3. Payout time 4.
5.
Venture profitability Project value or worth
There are a number of variations in each of these categories, but they will not be discussed here. One of the simplest expressions for profitability measure is the per cent profit on sales. This is simply the unit profit, either before or after taxes, as desired, expressed as percentage of unit sales price. Profitability is thus expressed in terms of the margin between cost and sales price. 50
INDUSTRIAL A N D ENGINEERING CHEMISTRY
Table V.
Estimation of Capital Investment for Product “X”
CaDacitv. 50 million Ib/vr
Equipment (see detailed list) Equipment (adjusted for inflationary effects) Fixed capital cost (equipment cost times 3.63) Working capital (1 5% of fixed capital cost) Total capital cost (fixed plus working capital cost)
cost, million
1
1.8 1.9 6.9
1.o
7.9
Unlike the more detailed methods, payout time and the simpler return on investment formulas are generally calculated on the assumption that money has no “time value” (47). For preliminary estimates these methods are sufficiently accurate for the rough screening required to determine whether a project appears worthwhile and how development work should be directed. I n the return-on-investment method, profit after all costs is compared with the investment in the project. In its basic form it may be defined as the ratio of the annual profit to capital investment, expressed in per cent. The investment includes both fixed and working capital. Profits may be on a before or after taxes basis, as desired. I t is usually sufficient to consider the potential return based on figures for a single typical year once the plant is operating at design capacity. The payout time method in its basic and most applicable form may be defined as the number of years in which fixed capital investment will be returned by the profits caIculated before deducting depreciation. Working capital is not included since it is held, for example, as cash, raw materials, and finished product inventories, which presumably can be sold and converted into cash when the project is discontinued. The annual venture profit expressed as a percentage of capital investment is called the venture profitability. It shows the additional gain to be expected over and above a minimum acceptable return for an investment of a given risk. I t is a means of quantitatively comparing the financial attractiveness and the endeavors having entirely different risk. The project value or worth method shows a dollar figure that represents the potential value of the entire project to the company. I t can be used in preliminary evaluation of projects to estimate the amount of R&D justified for a given ultimate profit and is described elsewhere ( I 7, 20, 29, 47). I n the methods just described, there is no allowance for the interest that the money spent on the project could have been earning had it been invested in bonds or other securities. Present-worth methods are some-
what time-consuming to calculate by hand, but can be worked readily with a computer. I n general, they a r e warranted only at later stages of development when t h e basic information on the project is relatively reli able. An important factor in the analysis is to determine just how much effect a change in the major assumption, such as sales price, volume, and cost will have on profitability. I t is obvious that to be attractive the projects involving greater risk should yield a higher return. A profitability analysis for a new capital investment can be greatly improved by careful application of a
Table VI.
statistical technique that gives probabilities for various profit levels (35). Sample Estimate
Tables V through VI11 show a simple format of a hypothetical case in which the estimator was asked to perform a preliminary economic evaluation of product "X" before development work was started. Owing to the stage of the project, it was necessary to make a larger number of assumptions in order to estimate the capital investment, manufacturing costs, and profitability of the product. Therefore, it was largely based on the
Estimation of Manufacturing Costs of Product "X"
Item
Calculation basis
Direct Manufacturing Costs Raw materials Direct labor
Cost, #/lb
See detailed calculation Assume 10 men/shift 3 shifts/day $7OOO/man/yr Assume 0.5#/lb 270 of fixed capital/year for labor 2% of flxed capital/year for materials 15% of repair & maintenance 20% of direct labor Assume 1$/short ton of product Assume 2% of sales price 15% of direct labor
Utilities Repair and maintenance Supplies laboratory Packing and shipping Royalties and patents Supervision
9.73
0.42
0.50 0.55
0.08 0.08
0.05 0.40
0.06
Subtotal direct manufacturing costs Indirect Costs Plant overhead Payroll overhead Depreciation Property tax Insurance By-product credit
11.87
50% of productive labor (direct, maintenance, supervision)
0.38
22% of productive labor (direct, maintenance, supervision)
0.1 7
Straight-line, 10 years 3% of fixed capital 1% of fixed capital Market value of by-products
1.38 0.4 1 0.1 4 (2.00)
Subtotal indirect costs
0.48
Total manufacturing costs
12.35
Table VII.
Estimation of the Total Costs of Product "X"
Item
Manufacturing costs General expenses Administration Sales R&D Interest
Cost, #/lb
Calculatlon basis
See Table VI
5% 8% 4% 5%
of of of of
12.35
manufacturing costs manufacturing costs manufacturing costs depreciation
0.62 0.99 0.49 0.07
Total general expenses Total cost o f product "X"
2.1 7 14.52
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~~
Table VIII.
~~
Profitability Estimation of Product “X”
blv
blY
Sales (20#/lb) Manufacturing costs General expenses
6,175,000 1,058,000
Total cost
7,2 60,000
Profit before taxes Income tax (48%)
2,740,000 1,3 15,200
Profit after taxes Profit on sales after taxes Return on investment after taxes Payout time after taxes
judgment of the estimator. The assumptions used were enumerated and explained in the text of the estimate. Once a nominal annual rate of production was ascertained, a rough preliminary flowsheet was drawn, and a preliminary material-and-energy balance was calculated based on information obtained from basic research. Then a list of processing equipment was compiled noting the size, judgment was exercised on the probable materials of construction, and operating pressures were estimated. The purchased cost of all items on the process equipment list was determined from cost files and from literature sources by utilizing the exponential capacity adjustment method in cases where no cost data were immediately available for a piece of equipment at the sized capacity. Since new quotations of the equipment were not readily available, the cost data were brought up to date by the use of cost indexes. Since the process involved solids as well as fluids, the fixed capital cost was estimated by multiplying the purchased cost of equipment with the “Lang” factor of 3.63. T o this cost 15% was added for working capital. The resulting figure is the total capital cost estimate. The estimation of the manufacturing cost is shown in Table VI. The total cost of the product was determined by adding allocated general expenses to the manufacturing costs (Table VII). The estimated profitability of product “X” was expressed in per cent profit on sales, per cent return on investment, and payout time (Table VIII). The selected sales price at which the product is to be sold was based on a preliminary market analysis and evaluation of the competition. Requirements of a report on a preliminary cost estimate a t the bench-scale research stage are similar to those for any good technical report. I t is helpful to management if such reports follow a standard format with the same elements of the estimate reported in the same place. Such reports are intended to assist the decision maker by presenting and qualifying certain information. A number of assumptions must be made in every preliminary estimate, and the importance of recording the complete evaluating basis cannot be 52
10,000,000
INDUSTRIAL AND ENGINEERING CHEMISTRY
1,424,800 14.1 % 17.9% 3.1 years
overemphasized. I t is advisable to record the source of information or forecasts and the date of transmission; since uncertainties will be large due to time lag and lack of information at the transition stage from basic research to development, sensitivity studies can expose the critical economic variables. LITERATURE CITED (1) Aries, R.S.,and Copulsk ,W.,“The
Marketing of Chemical Products,” Chemo-
nomic, New York, N.Y., 7948. (2) Aries R S and Newton R D “Chemical En ineering Cost Estimation,” pp 12,556,128, 299, McGriw-Hill;)New York, N. 1955. (3) Arnold, T. H., and Chilton, C. H., Chem. Eng., 70, 143 (Feb 18, 1963). (4) Baker, N. R., and Pound, W. H., “IEEE Transaction on Engineering Management,’’ Vol. EM-11,p 124,Dec 1964. (5) Chem. Eng., 70, 73 (June 7, 1963). (6) Ibid., 71, 160 (Aug 17, 1964). (7) Chilton, C. H.,ibid., 58, 10 (June 1951). (8) Chilton, C. H.,ibid., 73, 184 (April 25, 1966). (9) Cybal, E. C., Chem. Eng. Progr., 46, 57 (Feb 1950). (10) De Cicco, R.W., Chem. Eng., 75, 84 (June 3, 1968). (11) Disman, S., ibid., 69, 87 (Dec 24, 1962). (12) Dowling, T.E., ibid., 67, 85 (Oct 3, 1960). (13) Frumerman, R., ibid., 69, 101 (Oct 1, 1962). (14) Gallagher, J. T., ibid., 73, 89 (Dec 18, 1967). (15) Grumer, E. L.,ibid., 79, 190 (April 24, 1967). (16) Hand, W. E., Petrol. Refiner, 37, 331 (Sept 1758). (17) Hitchcock, L. B.,“Research Management,” Vol. VI, p 123, Sept 1963. (18) “Industrial Research-The Big Picture,” Chem. Week, 5 5 (Dec 1953). (19) Lang, H.L., Chem. Eng. 5 5 , 122 (June 1948). (20) Manley, ibid., 6 2 , 130 (Jan 1955). (21) McLean, W. H “Marketing and Financial Considerations,” paper Commercial Chemich Development Assoc., New York, March 23,1953. (22) Miller, C. A,, Chem. Ens., 71, 226 (Sept 13, 1965). (23) Nelson, W. L.,Oil Gar J. (July 22, 1957). (24) Newton, R . D., and Aries, R. S . , IND.ENO.CHEM.,43, 2304 (1951). (25) New York Ca ita1 Cost Estimating Committee, Amer. Assoc. Cost Engineers, Bull. 6 (4).166 (gem 1964). (26) O’Connell, F. P , Chem. Eng., 67, 150 (Feb 17, 1962). (27) “ O t l , Puinl and Drug Reporter,” Schnell, New York, N. Y. (28) Ransom, E. A., Chem. Eng., 74, (Nov 6, 1967). (29) Rosen, B. H., and Regnier, A. J., Chem. Eng. Progr., 5 2 , 500 (Dec 1956). (30) Scheyer, R.H., Chem. Eng., 69, 158 (Sept 3, 1962). (31) Souder, W. E., Chem. Eng. Progr., 63 (ll), 27 (Nov 1967). (32) Stevens, R. W., Chem. Eng., 54, 124 (Nov 1947). (33) Street, G. L., and Corrigan, T. E., “Hydrocarbon Processing,” p 147, Dec 1967. (34) Stuhbarg, D., Chem. Eng., 75,152 (Jan 15,1968). (35) Thorngren, J. T., ibid., 74, (Aug 14, 1967). (36) Van No7 C. W “Guide for Making Cost Estimates for Chemical Type Operations, ‘U. S. Bireau of Mines, Washington, D. C., 1947. (37) Vaughn, T. H.,Chem. Eng., 5 8 , 143 (Sept 1951). (38) Vaughn T. H., Coordination of Financial and Research Planning,” paper by Commercial Chemical Development Assoc., New York, N. Y.,March 23, 1953. (39) Walton, P. R., Chem. Eng., 73,172 (Aug 15,1966). (40) Weaver, J. B.,Bauman, H. C., and Heneghan, W. F “Chemical Engineering Handbook,” Section 26,4th ed, McGraw-Hill, New Yd;k, N. Y., 1963. (41) Weinberger, A. J., Chem. Eng., 71, 91 (March 30, 1964). (42) Weinberger, A. J., ibid., p 85 (Dec 23, 1964). (43) Wessel, H. R., ibid., 59, 209 (July 1952). (44) Wessel, H. R., ibid., 60, 168 (Jan 1953). (45) Zimmerman, 0. T.,and Lavine, J.,“Cost Engineering,” p 4, April 1962.
#.,
‘I
