Homework #5

ChE 356
due 2/23/07

1. Solve 3.20 (b). Use i = 15% and n = 10 years. Examine the sensitivity of your
answer for NPV to changes in energy cost and heat transfer coefficient.

NPV is given by
F
NPV Io
r
Equivalently we could maximize rNPV and use the friendlier objective function
max f F rI o

To get this in terms of oil temperature and area of the heat exchanger, we substitute in for
the initial investment and the expected future payment
max f 2 10 6 wC p 400 T2 8000 r 25 A ($/year)
The energy balance gives us a relationship between the oil temperature and the area of the
heat exchanger
UA 400 T2
wC p 400 T2
ln150 / T2 250
Substituting this equation into the objective function to eliminate area gives
wC p 150
max f 2 10 6 wC p 400 T2 8000 25r ln
U T2 250

Differentiating with respect to oil temperature and setting it equal to zero gives
df wC p 1
2 10 6 wC p 8000 25r 0
dT2 U T2 250
25r 1
0.016 0
100 T2 250
T2 250 15.625r

For a 15% interest rate over 10 years

i 1 i 0.151.15
n 10
r 0.1993
1 i n 1 1.15 10 1
This gives
T2opt 250 15.625 0.1993 253.1 F

The area that corresponds to this temperature is given by the energy balance
wC p 150 75000 150
A ln ln 2906.2 ft 2
U T2 250 100 3 .1

In order to determine sensitivity of the optimum to changes in energy cost, we look at the
optimal NPV in terms of energy cost

NPV opt


C E wC p 400 T2opt 8000
25
wC p
ln
150
r U T 250
2
opt

0.016 75000 400 253.1 25 75000 150

0.1993 100 3.1
$811,973
We then find the relative sensitivity

S CNPV
NPV opt C E


C E wC p 400 T2opt 8000
E
C E NPV opt rNPV opt

0.016 75000 400 253.1

0.1993 811973
S CNPV
E
1.089

The sensitivity of the optimum to changes in heat transfer coefficient is given by

NPV opt U wC p 150 1
S UNPV 25 ln opt
U NPV opt
U T2 250 NPV opt
75000 150 1
25
100 3.1 811973

SUNPV 0.0895

We can see that the optimal NPV is extremely sensitive to energy cost and not very
sensitive to the heat transfer coefficient.

2. Update cost information in Table B.4 for steam, electricity, and cooling water.
Also update the indices in Figure B.4 to 2006.

Here are some sample values

Rates for industrial utilities, 2006
Utility Cost ($) Unit
Steam
 500 psi (250C) 10-12 1000 kg
(200C) 8-11 1000 kg
Exhaust (100C) 9-10 1000 kg
Electricity
Purchased 0.04-0.08 kWh
Self Generated 0.03-0.08 kWh
Cooling water (30C)
Well 11-55 1000 m3
River or salt 8-21 1000 m3
Tower 8-10 1000 m3

Cost Indices, 2006

Nelson-Farrar 2023
Marshall & Swift 1294.6
Engineering news 604 (2002)
Chemical Engineering 501.3

3. Solve 3.13 using NPV.

The series of payments for the glass lined chlorinator looks like this

The series of payments for the cast iron chlorinator looks like this
From this, we can calculate the net preset value of each investment for the respective
interest rates
Glass Lined Chlorinator
Year Costs Payments Total PV (i=0.1) PV (i=0.2)
0 ($24,000) $0 ($24,000) ($24,000) ($24,000)
1 ($2,400) $1,700 ($700) ($636.36) ($583.33)
2 ($2,630) $1,700 ($930) ($768.60) ($645.83)
3 ($2,400) $1,700 ($700) ($525.92) ($405.09)
4 ($2,400) $1,700 ($700) ($478.11) ($337.58)
5 ($2,960) $1,700 ($1,260) ($782.36) ($506.37)
6 ($3,300) $1,700 ($1,600) ($903.16) ($535.84)
7 ($3,300) $1,700 ($1,600) ($821.05) ($446.53)
8 ($3,300) $1,700 ($1,600) ($746.41) ($372.11)
9 ($3,300) $1,700 ($1,600) ($678.56) ($310.09)
10 ($3,300) $5,700 $2,400 $925.30 $387.61
NPV ($29,415) ($27,755)

Cast Iron Chlorinator

Year Costs Payments Total PV (i=0.1) PV (i=0.2)
0 ($7,200) $0 ($7,200) ($7,200) ($7,200)
1 ($2,170) $0 ($2,170) ($1,972.73) ($1,808.33)
2 ($2,170) $0 ($2,170) ($1,793.39) ($1,506.94)
3 ($2,170) $0 ($2,170) ($1,630.35) ($1,255.79)
4 ($9,370) $800 ($8,570) ($5,853.43) ($4,132.91)
5 ($2,170) $0 ($2,170) ($1,347.40) ($872.07)
6 ($2,170) $0 ($2,170) ($1,224.91) ($726.73)
7 ($2,170) $0 ($2,170) ($1,113.55) ($605.61)
8 ($9,370) $800 ($8,570) ($3,997.97) ($1,993.11)
9 ($2,170) $0 ($2,170) ($920.29) ($420.56)
10 ($2,170) $800 ($1,370) ($528.19) ($221.26)
 NPV ($27,582) ($20,743)

We can see from the analysis that the cast iron chlorinator is favored at both interest rates.