13

The Economic Balance

An engineering cost analysis can be used to find either a minimum total cost
or a maximum benefit, such as a maximum profit for a venture. Such a cost
analysis is frequently called an economic balance because it involves the
balancing of economic factors to determine an optimum design or optimum
operating conditions. In engineering work, correct economic analyses of
both designs and operations are essential skills. An understanding of the
underlying concepts of such analyses is needed for the solution of many
problems and forms the basis for decisions; these can be on-the-spot or
detailed investigations.
In the early days of chemical engineering, the process economics course
was a course in economic balance. In recent times, the economic balance part of a
process economics course has been referred to as simple optimization of process
equipment. Peters and Timmerhaus [1] call this topic optimum design.
The goal is to attain the “best” situation by applying simple optimum-
seeking techniques. The major challenge is to recognize the existence of an
economic balance problem and then to formulate the problem for a solution. An
economic balance then is a study of all costs, expenses, revenues, and savings that
pertain to an operation or equipment size.
Linear programming, dynamic programming, geometric programming, and
other sophisticated optimum-seeking techniques are beyond the scope of this
text. For more on these types of optimization methods, the author suggests the
reader may wish to consult Refs. [1 – 5].

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330 Chapter 13

13.1 GENERAL PROCEDURE

The initial step in the development of an economic balance is to determine what
variable(s) is to be optimized. Before we begin discussing the methodologies,
there is terminology that needs to be defined.
The term cost refers to a one-time purchased price of capital equipment,
such as a heat exchanger. If an item is a recurring “cost,” it is called an expense,
such as utilities or maintenance expense. Although this terminology is different
from that found in some texts, at least it is consistent with the material in
this text.
For the simplest case, all costs and expenses are related to an arbitrarily
selected controllable variable. This variable might be the number of pounds
of product manufactured, the area of a heat exchanger, the number of
evaporator effects, the internal rate of return, etc. Those items in the cost
analysis that increase with an increase in the controllable variable are
balanced against those items that decrease as the controllable variable
increases. Any costs or expenses that are constant, that is, independent of the
controllable variable, do not need to be included in the analysis since they do
not affect the final result of the analysis and only complicate the mathematics.
Therefore, in an economic balance, the analysis is not limited to the sum of
the fixed and variable expenses, although most examples are presented in this
manner.

13.2 PRACTICAL CONSIDERATIONS

The various methods for determining optimum conditions described in this
chapter are theoretical and they meet the required conditions for an optimum
case. Often the solution may lead to a result for which industrial equipment is not
available in the optimum size. Some equipment is manufactured in discrete sizes.
For example, in the case of an optimum pipe size, a mathematical or graphical
result may indicate that a pipe diameter of 2.67 in is optimum. If the fluid to be
pumped is compatible with steel and Schedule 40 pipe is suitable, commercially
available pipe sizes are 212 in ðID ¼ 2:469 inÞ or 3 in ðID ¼ 3:069 inÞ sizes. The
engineer would be confronted with making a choice. The smaller diameter pipe
would lead to higher pumping costs and lower pipe costs while the larger
diameter pipe would have lower pumping costs but slightly higher pipe costs.
Now we encounter an “engineering trade-off” that the engineer must resolve. In
the author’s experience, the 3 in pipe would be recommended since this allows
for any potential errors in the theoretical calculations but also provides for
increased production that will surely occur once the equipment is put in
operation. Further, the company may have a standards program for piping such

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The Economic Balance 331

that only nominal 1, 1 12, 2, 3 in, etc. pipe will be stocked. These are practical
considerations that the engineer must recognize.
Some equipment is available or can be manufactured in a continuum of
sizes. In general, it is often cheaper to accept a slightly larger size rather
than incur the expense of a tightly designed equipment item. For example,
results of calculations indicate that a 2250 ft2 is required for specific
conditions but a fabricator has off-the-shelf exchangers of 2000 or 2500 ft2. It
is frequently cheaper to purchase the 2500 ft2 unit rather than have a 2250 ft2
exchanger designed and manufactured. Further, the larger unit permits more
operating flexibility. An analysis of optimum conditions can only give
approximate results but do serve the purpose of obtaining a minimum cost.
There are other factors that might affect an engineering recommendation,
for example, the physical properties of a material. A material may be too viscous
under the proposed operating conditions and a theoretical optimum may not
attainable. Intangible features may also enter into the analysis like uncertain
design or processing conditions or perhaps uncertain product selling price that
might affect the optimization. Therefore, the economic analysis precludes the
engineer from exercising extreme accuracy.

13.3 GENERAL PROCEDURE FOR FINDING OPTIMUM

CONDITIONS
The first step is to determine what variable is to be optimized, and then it is
necessary to determine what relationships affect the variable. Equipment
designed to provide a specific duty or service should be sized so that the total
annual expense, that is, the sum of the annual fixed and variable expenses, is a
minimum. This ideal must be consistent with operating limitations and provide
some flexibility. The essential elements of an economic balance are:
. Fixed and variable operating expenses
. An allowance for depreciation
. A term for an acceptable return on an investment
Prior to the 1960s, economic balances were performed without a term
for the return on invested capital. Happel [6] identified the need to include
such a term because funds for a proposed venture would have to be obtained
from external sources or internally generated funds. In either case, the return
term represents an expense to the corporation no matter from where the funds
are obtained.
Two kinds of expenses are accounted for in an economic balance, namely,
variable and fixed operating expenses.

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332 Chapter 13

13.3.1 Variable Operating Expenses

These expenses are recurring expenses and were discussed in Chapters 3 and 5.
Table 13.1 is a list of those operating expenses that affect optimization of
equipment size. Only those expenses that change with equipment size need be
included in the analysis. Engineers will frequently complicate the mathematics
by including variables that are of little or no consequence. A general rule is that as
a first attempt, keep the analysis simple, and if more variables are thought to be
required, then include them later.
In the case of equipment optimization, the major operating expenses are the
utilities. Examples are
. Pipe size—electricity required to pump fluids
. Insulation thickness—the value of the condensed steam
. Multiple-effect evaporators—the cost of steam required
Other operating expenses that may be included are maintenance and waste
disposal expense, and in the case of a chemical reactor, chemical raw materials
may be a factor.
Table 13.2 is a guide for maintenance expenses.

TABLE 13.1 Operating Expenses in Equipment Optimization

Item Comments

Raw materials Generally only enters if the equipment

is a reactor
Direct operating labor Seldom affects the optimization
Supervision Seldom affects the optimization
Maintenance Can be a factor; usually expressed
as a fraction of the fixed
capital investment, (0.05 –0.10) FCI
Plant supplies Usually negligible
Utilities: Usual variables
Steam
Electricity
Water
Fuel
Property taxes Generally expressed as a fraction of
the fixed capital investment, (0.02 –0.04) FCI
Insurance Generally expressed as a fraction of
the fixed capital investment, (0.01 –0.02) FCI

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The Economic Balance 333

TABLE 13.2 Annual Maintenance Expense: Percentage

of the Fixed Capital Investment

Type of equipment Maintenance, %

Simple, light use 2–5

Average 5–8
Heavy or complicated 8–10

13.3.2 Fixed Operating Expenses

These expenses include depreciation and plant indirect expenses such as
property taxes, insurance, fire protection. All these items are expressed as a
fraction of the equipment cost or the fixed capital investment. The fixed
capital investment represents the total money spent to purchase equipment and
place it in operation. It is customary to include the return on investment on an
after-tax basis using the federal rate but occasionally state and local taxes may
also be included in the expression for the fixed expenses. Table 13.3 is a
checklist of these items. To simplify the mathematics, annual expenses are
considered to be constant, therefore; depreciation is calculated on a straight-
line basis.
To estimate the total fixed capital investment, the Hand, Wroth, or
Brown methods suffice for economic balances since most are of a preliminary
nature.
As a general rule, variable operating expenses decrease with increasing
equipment size while fixed expenses increase with increasing size, as shown in
Figure 13.1.

TABLE 13.3 Checklist of Fixed Capital Items

Delivered equipment costs

Equipment installation
Automatic control equipment
Installation of automatic control equipment
Piping and ductwork
Insulation
Electrical equipment and installation
Auxiliary equipment
Engineering costs association with equipment installation

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334 Chapter 13

FIGURE 13.1 Optimum thickness of insulation—typical results.

13.4 PROCEDURE FOR SOLVING SINGLE-VARIABLE

BALANCES
There are many instances where the optimization is based on a single variable. In
that case, the procedure is simple. In Figure 13.1, the objective is to find the
insulation thickness that gives the least total cost. The single variable then is the
insulation thickness and variable and fixed cost relationships can be developed.
The general procedure for solving single-variable problems consist of the
following steps:
1. Determine all expenses that need to be considered in the balance. These
will be those expenses that vary as the size changes. For checklists, refer
to Tables 13.1– 13.3. Expenses that do not change need not be included
but it is an error to exclude an expense that varies with equipment size.
2. Determine if any operating limitations exist. Some common
examples are:
. Limiting pressure drop in packed and tray towers above where
flooding occurs.

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The Economic Balance 335

. Limiting head for pipelines when flow is by gravity.

. A safety margin for reflux ratio in a distillation column above
minimum reflux to ensure some tolerance because of inaccuracies in
design and thermodynamic data
3. Mathematically express the expenses as a function of the variables,
preferably those related to equipment size; otherwise use variables that
define the operation, such as temperature, concentration, pressure. The
final expression should include all pertinent expenses. The variables
next need to be reduced to only those items that are significant.
Frequently, only one variable is used in total expense equations
e.g., pipe size for economic pipe diameter, number of effects in
evaporator systems, etc.
4. Ascertain if the optimum size must be one of a number of discrete sizes
that are commercially available or whether it can be any size.
For example, pipe insulation as shown in Figure 13.1 can only be
purchased in standard thickness. Distillation towers, heat exchangers,
rotary driers, etc. may be fabricated in any size specified by the design
engineer.
5. Solve the total expense equation by either an analytical or graphical
method. These two methods have certain advantages and disadvantages.

13.4.1 Analytical Method

Common mathematical techniques are used to locate the optimum. For
problems concerned with equipment size, the minimum size is sought;
however, in cases where optimum yield is sought, the objective is to find the
maximum. For the simple case in which all expenses are expressed as
functions of a single variable, the total expense equation can be differentiated
with respect to the single variable, the result set equal to zero and the equation
solved for the optimum. Unless it is obvious from the nature of the expense
curves that there is a true optimum, mathematical tests must be performed
as a check.

Total annual expenses ¼ fixed expenses þ variable expenses

where the fixed expenses are depreciation and plant indirect expenses. By
convention, the return on investment term is included with the fixed expenses.
The variable or recurring expenses are utilities, maintenance, etc. Therefore,

TAE ¼ FE þ VE ð13:1Þ

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336 Chapter 13

where

TAE ¼ total annual expenses

FE ¼ fixed expenses
VE ¼ variable expenses
If the derivative of Eq. (13.1) is taken with respect to the controllable variable
x, then
dðTAEÞ dðFEÞ dðVEÞ
¼ þ ð13:2Þ
dx dx dx
Equation (13.2) is set equal to zero and solved for x,
dðFEÞ dðVEÞ
þ ¼0 ð13:3Þ
dx dx
The value of x is either a maximum or minimum, depending on the problem
objective.
Advantage of method: It is a quick method.
Disadvantages of method:
1. Does not afford ready comprehension of how different cost elements
vary with size.
2. Final answer does not yield standard sizes.
3. Does not indicate how sharp the maximum or minimum curve is at the
optimum.
4. May result in an equation that is difficult to solve mathematically.

13.4.2 Graphical Method

For a reasonable range of sizes, the fixed and variable expenses in the total
expense equation are calculated and tabulated. For piping and insulation, discrete
commercial sizes are selected. The graphical method is shown in Figure 13.1. For
equipment that is not fabricated in discrete sizes, the selection is dictated by the
design engineer or by common engineering practice. The optimum is found by
plotting the fixed expenses, variable expenses, and the total expense curves as a
function of the controllable variable. From the plot, one may observe the nature
of the optimum and provide a basis for judgment. If the curve has a sharp
minimum, the indicated size is correct; however, if the total expense curve is
relatively flat, there is some latitude in the choice. For instance, if the proposed
investment is to be a minimum, the smaller equipment size is selected, whereas, if
a margin for increased capacity is desirable, then a larger size might be selected
provided that there is not a significant increase in the total annual expenses.

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The Economic Balance 337

Advantages:
1. Yields an answer for available or approximate sizes that will provide
the desired service at minimum cost or will provide maximum yield.
2. Produces a solution where the analytical method may be difficult or
impossible to solve.
3. Indicates pictorially how the fixed, variable and total annual expenses
vary with size.
Disadvantage: Takes more time to solve:
Example 13.1 is an illustration of the analytical and graphical techniques.

Example 13.1
A food company is concerned is about the conservation of energy in their baking
ovens. New insulation needs to be installed and the information for this economic
analysis is:

Temperature at surface of the 550 F

inside oven wall
Ambient air temperature 70 F
Combined ambient air film coefficient 4 Btu/hr ft2 F
Thermal conductivity of insulation 0.30 Btu/hr ft F
Insulation cost, installed $3.50/board ft
(A board foot is 1 ft2 of area,
1 in. thick or 144 in.3)
The value of heat $3.00/MM Btu
Estimated oven life 10 yr
Depreciation 7 years straight-line
Maintenance 3% FCI/yr
Insurance and property taxes 1.5% FCI/yr
Combined federal and state taxes 42%
Stream time 8700 hr/yr
Cost of capital 10%

Determine the optimum insulation thickness.

Only the expenses that appear to vary with insulation thickness will be
considered:
. Installed cost of the insulation
. Cost of heat lost through the oven wall
. Maintenance on the insulation
. Depreciation

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338 Chapter 13

. Insurance and property taxes

. Return on investment
Analytical Solution:
Basis: 1 year of operation and 100 ft2 of oven wall surface. Let
t ¼ thickness of insulation; in
TAE ¼ total annual expense; $
q ¼ heat loss through insulation; Btu=hr
U ¼ overall heat transfer coefficient; Btu=hr ft2 =8F
FCI ¼ fixed capital investment; $
A ¼ area of oven wall; ft2
DT ¼ driving force temperature difference; 8F

Total fixed expenses ¼ depreciation þ return on investment ð13:4Þ

 
1 0:10
Total fixed expenses ¼ FCI þ FCI ð13:5Þ
7 1 2 0:42

Total fixed expenses ¼ 0:143 FCI þ 0:172 FCI ¼ 0:315 FCI ð13:6Þ
2
On the basis of 100 ft
FCI ¼ ð100Þð3:50Þt ¼ 350t ð13:7Þ
Therefore,
Total fixed expense term ¼ ð0:315Þð350Þt ¼ 110t ð13:8Þ
Variable expenses ¼ Cost of heat lost þ maintenance
þ insurance þ property taxes ð13:9Þ


$3:00
Heat loss expense ¼ ðQÞð8700Þ ð13:10Þ
106
but
q ¼ UADT ¼ Uð100Þð500 2 70Þ ¼ 43; 000U ð13:11Þ
and
ð1Þ
U¼ ð13:12Þ
1=½0:25 þ ðtÞð0:30Þ=ð12Þ

  
ð43; 000Þð8700Þð$3:00Þ 1
Heat loss ¼ ð13:13Þ
106 0:25 þ 0:278t

Maintenance ¼ 0:03 FCI ¼ ð0:03Þð350Þt ¼ 10:5t ð13:14Þ

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The Economic Balance 339

Insurance þ property taxes ¼ 0:015 FCI ¼ 5:25t ð13:15Þ

1122
Total variable expenses ¼ 10:5t þ 5:25t þ ð13:16Þ
0:25 þ 0:278t

Total annual expenses ¼ 1100t þ 10:5t þ 5:25t

1122
þ ð13:17Þ
0:25 þ 0:278t
 
1122
Total annual expenses ¼ 125:8t þ ð13:18Þ
0:25 þ 0:278t
 
1122
dðTAEÞ=dt ¼ 125:8 2 ð13:19Þ
ð0:25 þ 0:278tÞ2

t ¼ 4:75 in
This solution does not indicate how sharp the minimum is, nor does it indicate
which of the nearest sizes of insulation will be more economical, 4 or 5 in
thickness. This decision must be resolved by calculating the total annual expense
for both sizes, viz. 4 and 5 in, or by preparing a graphical solution. Probably the
5-in insulation will be selected.
Graphical Solution:
The graphical solution is performed using the same expense equations as in
the analytical solution. The terms for each expense item are calculated and
presented in Table 13.4. In order to complete this solution, the fixed expenses
[Eq. (13.8)], the variable expenses [Eq. (13.9)] and the total annual expenses
[Eq. (1.17)] are plotted as a function of t, the thickness of the insulation. The
resulting total minimum expense is found to be 4.75, as shown in Figure 13.2.

13.5 PROCEDURE WITH MORE THAN ONE CONTROLLABLE

VARIABLE
In some economic analysis problems, more than one controllable variable affects
the optimum cost or maximum yield. The general approach, analytical or
graphical, for solving this type problem is the same; however, determining the
optimum is rather tedious. This situation occurs when technical relations between
design, batch size, or other economic conditions produce a basis equation such as
in Eq. (3.20):
CT ¼ gðx; yÞ ð13:20Þ

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 340
TABLE 13.4 Tabulated Results of Graphical Solution for Example 13.1

Thickness 3 in 4 in 4.75 in 5 in 6 in 7 in 8 in
Fixed expenses $330.00 $440.00 $522.50 $550.00 $660.00 $770.00 $880.00
Variable expenses
Heat loss $1,035.06 $823.79 $714.42 $684.15 $584.98 $511.07 $454.42
Maintenance 31.50 42.00 49.88 52.50 63.00 73.50 84.00
Taxes & insurance 15.75 21.00 24.94 26.25 31.50 36.75 42.00
Total variable expenses $1,082.31 $886.79 $789.24 $762.90 $679.98 $621.32 $580.42
Total annual expenses $1,412.31 $1,326.79 $1,311.74 $1,312.90 $1,339.48 $1,391.32 $1,460.42

Chapter 13
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The Economic Balance 341

FIGURE 13.2 Optimum insulation thickness—Example 13.1.

For example, in a manufacturing process, the production capacity may vary with
the speed of the equipment and its size. Since both variables are controlled by
management or design personnel, perhaps the best policy is a combination of
optimum speed and optimum size. The mathematical relationships for a case of
two (or more) variables may be:

b
CT ¼ ax þ þ cy þ d ð13:21Þ
xy

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342 Chapter 13

where

CT ¼ annual dollars
x; y ¼ controllable variables
a; b; c; d ¼ constants

The annual cost will pass through a minimum when either x or y is held constant
as found by partial differentiation.
›c b
¼a2 2 ð13:22Þ
›x yx
and
›cT 2b
¼ 2 ð13:23Þ
›y xy
If cT is plotted as the ordinate with x as the abscissa and y as the third coordinate, a
curved surface results as shown in Figure 13.3. The minimum cost cT is found by
plotting Eq. (13.21) for assumed constant values of x. The line made where one
constant x plane intersects the surface will give a minimum cost cT and an
optimum value. The same result may be found analytically by setting Eq. (13.23)
equal to zero and solving for y at a constant assumed value of x.
Example 13.2 is an illustration of finding the optimum when two
controllable variables are present. This problem is adapted from Schweyer [7].

Example 13.2
A plastics plant is producing a variable number of blended specialty products
per year that sell at a fixed price. The final product is composed of two materials,

FIGURE 13.3 Economic balance with two variables.

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The Economic Balance 343

A and B, with some of each being required. The costs will vary depending upon
the amount of each component required to meet production.
Expenses for the process employing component A vary as 2A/102 dollars
per unit of product. Expenses for component B are (36 B/A) þ 720/B with B being
the number of required annually. The total cost per unit of finished product is


B 720 2A
cT ¼ 36 þ þ 6 dollars per unit ð13:24Þ
A B 10
All other costs are constant and may be neglected. Find the optimum amounts of
A and B required to meet the minimum total cost.

Solution:
If the amount of A components is fixed (held constant), the optimum
amount of B components can be determined by differentiating the annual cost
equation at constant A to give
dC1 36 720
¼ 2 2 ¼0 ð13:25Þ
dB A B
720A
B2 ¼ ð13:26Þ
36

BOPT ¼ 4:48A 0:5 ð13:27Þ

For an annual usage of A, the corresponding amount of B is

A annual units BOPT annual units

50,000 1010
100,000 1420
150,000 1740
200,000 2010
250,000 2240

To find AOPT, direct substitution of BOPT into the total cost equation yields

36ð4:48A 0:5 Þ 720 2A

CT ¼ þ 0:5
þ 6 ð13:28Þ
A 4:48A 10
Absolute annual costs per item are expressed in terms of A. A can be computed
and the results are shown in Table 13.5.
From the graphical solution, the minimum unit costs occurs at an
average annual amount of 192,000 units of A. The same results could also be

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344 Chapter 13

TABLE 13.5 Tabulated Results for Minimum Unit Costs in Multivariable Problem

A 50,000 100,000 150,000 200,000 250,000

324/A 0.5 1.45 1.04 0.83 0.72 0.65
2A £ 1026 0.10 0.20 0.30 0.40 0.50
CTmin 1.55 1.24 1.13 1.12 1.15

obtained by mathematical solution of optimum A, using the preceding unit cost

equation.
Using partial differentiation of the annual unit cost equation for CT, the
result is
›C T 36
¼ 2 720B 22 ¼ 0 ð13:29Þ
›B A
At constant B, the result would be
›C T 36B 2
¼ 2 þ 6¼0 ð13:30Þ
›B A 10
These two equations can be solved simultaneofusly for AOPT and BOPT starting
with the second equation as follows:
36B
¼ 2 £ 106 ð13:31Þ
A2
rffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
36B £ 106 pffiffiffi
AOPT ¼ ¼ 4250 B ð13:32Þ
2
This value of A is substituted in Equation 13.31 to give
36 720
0:5
2 2 ¼0 ð13:33Þ
4250B B
Multiplying through by B 2 yields

0:00846B 1:5 ¼ 720

BOPT ¼ 1940 units per year

From the AOPT equation,
pffiffiffiffiffiffiffiffiffiffi
AOPT ¼ 4250 1940 ¼ 192; 000 units per year
which is the same result obtained from the graphical solution. See Figure 13.4.

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The Economic Balance 345

FIGURE 13.4 Solution to multivariable problem—Example 13.2.

13.6 INTERACTIVE SYSTEMS

Frequently more than one item of equipment influences the controllable
variable(s) and the optimum solution. In this case, when solving a problem
graphically, if only one item of equipment is selected, the total annual expense
curve does not pass through a minimum but continues to decrease with increasing
size or it may increase with increasing equipment size. If this phenomenon
occurs, then more than one equipment item is affecting the optimization. The
next step is to inspect the flowsheet for equipment directly upstream or down-
stream from the selected item. It may be necessary to group two or more items
together and treat them as a single equipment item. Such a system is said to be
interactive since more than one item of equipment affects the optimum condi-
tions. Example 13.3 is an illustration of such a system.

Example 13.3
A pharmaceutical product is prepared as a 15% by weight aqueous solution. The
moisture is removed partly by evaporation and then almost completely removed
in a vacuum drier. Figure 13.5 is a flowsheet of the process. The annual fixed
expenses for the evaporator – drier system are related to the weight fraction of
solids S of the slurry fed to the drier. The equation for the fixed expenses of the
system per year, FE, is
Fixed expenses ¼ FE ¼ ð18000Þ ðS 2 0:15Þ0:5 þ ð8895Þ ð1 2 SÞ ð13:34Þ
Evaporator Drier

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 346
Chapter 13
FIGURE 13.5 Flowsheet of evaporator –drier process—Example 13.3.

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The Economic Balance 347

The variable expenses, VE, for the evaporator are $0.003/lb water evaporated and
for the drier are $0.009/lb water removed. Develop an equation for the variable
expenses in terms of the weight fraction solids fed to the drier for a production of
3 tons/day of solution fed to the evaporator. Also, determine the optimum
concentration of the slurry from the evaporator.

Solution:
Basis: 1 year (300 operating days)
Duty: 3 tons/day fed to evaporator
Controllable variable: S, weight fraction of solids fed to the drier
Figure 13.5 is a flowsheet of the process. The variable expense of
evaporating water is


900 810
VE ¼ ð300Þ 6000 2 ð0:003Þ ¼ 5400 2 ð13:35Þ
S S
The variable expense of removing the remaining moisture in the drier on an
annual basis is


900 2430
VE ¼ ð300Þ 2 900 ð0:009Þ ¼ 2 2430 ð13:36Þ
S S
Then, the total annual expense (TAE) is
810
TAE ¼ ð18; 000ÞðS 2 0:15Þ0:5 þ ð8895Þð1 2 SÞ þ 5400 2
S
2430
þ þ 2430 ð13:37Þ
S
or
1620
TAE ¼ ð18; 000ÞðS 2 0:15Þ0:5 2 ð8895ÞðSÞ þ þ 11865 ð13:38Þ
S
If this equation is differentiated with respect to S, the result is
 
1 1620
dðTAEÞ=dS ¼ ð9000Þ 2 8895 2 2 ð13:39Þ
ðS 2 0:15Þ0:5 S
If Eq. (13.39) is set equal to zero, S is found by trial and error to be between 0.55
and 0.65. A plot of the total annual expenses as a function of S reveals that the
TAE gradually decreases to a minimum value at about 0.55, then passes through
an inflection point at S ¼ 0:604: After that, the TAE increases slightly to a
maximum at about 0.65. Beyond this the value of the total annual expense
decreases further as S approaches 1.0. Such behavior can be also detected by

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348 Chapter 13

mathematical tests. The results of the solution to Example 13.3 are found in
Figure 13.6 and Table 13.6.
This solution indicates that most of the water should be removed in the
evaporator and S should be increased to the maximum practical value. The
overriding decision would be the behavior of the slurry in the concentration range
of 0.65. There is the potential problem that the slurry might be too thick to pump.
In this case based upon a real plant problem, the slurry was too thick to pump but
by lowering S to between 0.5 and 0.55, it could be pumped. From Table 13.6, it is
apparent that the total annual expenses in the range of 0.50 – 0.55 are essentially
the same as at 0.65. Therefore, by operating at 0.50, the criteria of operability and
economics are satisfied.
The purpose of this problem was to demonstrate how equipment items
interact, and when such systems are encountered, more than one item must be
included in the optimization of the system. The designer should be aware of process
limitations when the total annual expense expression is developed. Judgment based
upon the engineer’s experience with respect to equipment and process limitations
exclusive of the mathematical results affect the final selection of the optimum.
Another example of an interactive system is a natural gas pipeline in which
the distance between compressor stations, pipe diameter, and compressor
discharge pressure of the fluid are the operating variables. The total annual
expense equation for this case can be solved by the simple approach of
differentiating the equation with respect to each independent variable, equating
the resulting equations equal to zero and solving as a set of simultaneous
equations. The alternative is to solve the equations by a sophisticated computer
optimization method. There is the possibility that several minima exist and they
need to be considered individually to obtain the best expense result.
Another example is a direct-fired heater with convection and radiation
sections. In this case, the variables might be the heat transfer areas for both
sections of the furnace or the furnace gas temperatures leaving both sections. As
demonstrated in this section, a system consisting of several equipment items or
parts of the system must be considered as a unit to find the optimum.

13.7 SUMMARY
This chapter was concerned with the development of an economic balance to
determine a minimum total expense or a maximum process yield. Methodologies
were developed and checklists were provided for the solution of simple
optimization problems. Analytical and graphical methods of solution were
demonstrated for single or multiple controllable variable cases. In some
instances, the analytical solution may be simpler to use but in other cases, the
graphical solution is more direct and less cumbersome mathematically but may
be more time consuming.

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 The Economic Balance
349
FIGURE 13.6 Solution to Example 13.3.

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 350
TABLE 13.6 Solution of Illustrative Example 13.3

S ðS 2 0:15Þ0:5 18000 ðS 2 0:15Þ0:5 2 8895S þ1620/S þ11865 TAE

0.15 0 0 2 1334 10800 þ11865 21331

0.175 0.1581 2846 2 1557 9257 þ11865 22411
0.20 0.2236 4025 2 1179 8100 þ11865 22811
0.25 0.3162 5692 2 2224 6480 þ11865 21813
0.30 0.3873 6971 2 2668 5400 þ11865 21568
0.35 0.4472 8050 2 3113 4629 þ11865 21431
0.40 0.5000 9000 2 3558 4050 þ11865 21357
0.45 0.5477 9859 2 4003 3600 þ11865 21321
0.50 0.5916 10649 2 4448 3240 þ11865 21306
0.55 0.6325 11385 2 4892 2945 þ11865 21303
0.575 0.6519 11734 2 5115 2817 þ11865 21301
0.60 0.6708 12074 2 5337 2700 þ11865 21302
0.625 0.6892 12406 2 5559 2592 þ11865 21304
0.65 0.7071 12728 2 5782 2492 þ11865 21303
0.675 0.7246 13043 2 6004 2400 þ11865 21304
0.70 0.7416 13349 2 6226 2314 þ11865 21302
0.75 21296
0.80 21286
0.85 21270

Chapter 13
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The Economic Balance 351

Interactive systems were introduced wherein more than one equipment

item affects the controllable variable and the resulting optimum. A solution to
such a problem was presented. Judgment based upon an engineer’s experience is
necessary in this case because there may be equipment or process limitations
beyond the mathematical solution that affect the final decision.

REFERENCES
1. MS Peters, KD Timmerhaus. Plant Design and Economics for Chemical Engineers.
New York: McGraw-Hill, 1991.
2. TF Edgar, DM Himmelblau. Optimization of Chemical Processes. New York:
McGraw-Hill, 1988.
3. GS Beveridge, RS Schechter. Optimization Theory and Practice. New York:
McGraw-Hill, 1970.
4. GV Reklaitis, A Ravindran, KM Ragsdell. Engineering Optimization. New York:
Wiley, 1983.
5. RW Pike. Optimization for Engineers. New York: Van Nostrand Reinhold, 1986.
6. J Happel. Chemical Process Economics. New York: Wiley, 1958.
7. H Schweyer. Analytical Models for Managerial and Engineering Economics. New
York: Reinhold, 1964.

PROBLEMS
13.1 Calculate the number of effects for the minimum total annual operating
expense of a small evaporator system to concentrate a colloidal suspension.
Steam costs $3.00/M Btu and each pound of steam will evaporate 0.8N lb of
water, N being the number of effects. The capital cost of each effect is $40,000
and has an estimated life of 10 years. The annual maintenance expense is 10% of
the capital cost. Labor and other expenses not mentioned may be considered as
independent of the number of effects. The system will operate 300 days/yr with
100 M Btu/day evaporator duty. Depreciation may be taken as 7-year straight-line
and the federal income tax rate is 35%. Annual net profit after taxes on the
investment must be 15% for the installed equipment.
13.2 A furnace wall is at a temperature of 1000 F. This wall is to be insulated
with a material whose installed cost is $12t/ft2 where t is the thickness in feet.
Thermal conductivity of the insulation is 0.03 Btu/hr ft F. The film heat transfer
coefficient is 4 Btu/hr ft2 F. Depreciation is 20% per year and the company return
on investment is 15% after taxes. Energy is valued at $5/million Btu and the
furnace operates around the clock 330 days/yr. Determine the optimum thickness
of the insulation.

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352 Chapter 13

13.3 Air (600 SCFM) at 80 F and 15 psia is to be compressed to 350 psia. This
can be accomplished in a single-stage or multistage compressor. Compressor
power requirement, CP, for 600 SCFM are given by
"
 #
Pb 0:285
CP ¼ 125 21
Pa

where
Pb ¼ discharge pressure from a given stage
Pa ¼ suction pressure of a given stage
Pb =Pa ¼ compression ratio ðCRÞ
CR ¼ ð350=15Þ1=N
N ¼ number of stages
Compressor fixed capital investment is $60,000N. Depreciation is 7-year straight-
line and the desired return is 10% after a 50% tax rate. Electricity costs $0.06/
kWh and the compressor will operate 8000 hr/yr. Recommend the number of
stages based on a minimum total annual expense.
13.4 A paper mill plans to use a combination settling basin and rotary filter to
remove insoluble solids from their wastewater stream as a first step in treatment
and recycle. Figure 13.7 is a sketch of the system. Solids settled in the basin are
given by
M ¼ 4000L 0:5 lb=day
where L is the length of the settling basin in feet. The capital cost of the basin is
$500 per foot of length. Solids not removed in the basin are removed in the filter,
with the filter area given by
A ¼ 10 þ 0:001M f ft2
where
Mf ¼ solids removed in the filter, lb/day.

FIGURE 13.7 Schematic diagram for Problem 13.4.

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The Economic Balance 353

FIGURE 13.8 Schematic diagram for Problem 13.5.

The capital cost of the filter is $2000/ft2 of filter area. The annual operating
cost of the filter is $0.80/lb day of solids removed in the filter. There are no
significant operating costs associated with the settling basin. Depreciation is 20%
per year and the return on investment is 20%. Determine the optimum length of
the settling basin.
13.5 You are in charge of the design of a process that requires 50,000 lb/hr of
air to be heated as shown in Figure 13.8. Other pertinent data are:

cp for air ¼ 0:24 Btu=lb F

U ¼ 8 Btu=hr ft2 F
Operation ¼ 8000 hr=yr
Waste steam value ¼ $0
High pressure steam value ¼ $4=M Btu
Annual capital cost for exchangers ¼ $10=ft2 per year

Determine the temperature of the exit air from the first heat exchanger Ti for the
minimum total annual expense. Discuss what happens to the various expenses as
Ti changes.
13.6 You are a process engineer in a paper mill that has six boilers producing
high-pressure steam. Each of these boilers is fired by 10,000 SCFH of natural gas.
The heating value of the gas is 1000 Btu/SCF and its cost under the present
contract is $5.00/SCF.
Because there are large amounts of wood waste both within the mill and
also in nearby forest product industries, you suggest to the plant manager the
possibility of utilizing these wastes as a fuel for the boilers. You are immediately
assigned this project and within a couple of weeks have collected the following
information:

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354 Chapter 13

. Each boiler operates at 8000 hr/yr.

. It will cost $1 million per boiler to retrofit for wood waste. This cost can
be depreciated over 5 years. On projects of this type, the company
requires a 20% return on the investment.
. The average heating value for the wood waste is 8000 Btu/lb.
. Boiler efficiency is roughly the same on the wood waste as on natural
gas.
. Wood waste within our mill amounts to 30 tons/day. This waste is
currently hauled from the mill by a private company at no cost to either
party.
. Your company can contract with other forest product companies in the
area to buy their wood waste. Collection and hauling costs will increase
with distance from the mill. You have estimated these amounts and the
respective expenses are
TABLE 13.1
Radius from Available waste, Purchase, collection
mill, mi tons/day and hauling costs, $/ton

10 15 20
10 –20 15 30
20 –30 15 40
. 30 90 50

a. Under the existing economic conditions, how many boilers should be

retrofitted?
b. What is your recommendation to management?
13.7 Twenty-five thousand pounds per hour of a heat-sensitive salt are to be
dried from 5.0 to 0.10% water. The amount of water to be removed per hour is
calculated to be 1226 lb and the estimated heat duty is 1.226 million Btu/hr. The
salt temperature remains constant at 150 F during the drying process using air that
has a maximum allowable inlet temperature of 430 F. The maximum allowable
mass velocity of air in the drier because of dusting conditions is 1000 lb/hrft2 of
surface area. The flow of the salt is countercurrent to the flue gas.
The FOB purchased cost of rotary driers can be calculated by the following
equation:
FOB cost ¼ 3:00ðperipheral areaÞ0:91
Peripheral area ¼ pDL

The FOB cost includes an induced-draft fan, stack, cyclone dust collector, oil
burner, feeder and instrumentation. For a rough estimate of the installed cost,
multiply the FOB cost by 1.75. A fixed charge of 40% covering depreciation,

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The Economic Balance 355

indirect expenses, and the profit on the investment is to be applied to the

installation cost of the drier and auxiliary equipment. The expense of heating the
air to 430 F from 70 F is $3.20 per M Btu. The operating time is 8500 hr/yr.
The specific heat of the air is 0.25. For Ua use
10G 0:16
Ua ¼
D

and q ¼ U a DT p4 D 2 L
Determine the following:
a. Diameter and length of the optimum drier for this service
b. Total capital investment for the drier installation
c. Annual expense of heating air for the optimum design

13.8 It is necessary to design a water-cooled condenser to remove

8,000,000 Btu/hr liberated by an organic condensing vapor at 200 F. The
overall heat transfer coefficient for the condensing vapor is 150 Btu/hrft2F.
Condensing heat transfer surface can be bought and installed for $40/ft2. It has
been decided by management to charge off 40% of the purchased price annually
to cover the return on the investment, property taxes, repairs and depreciation.
Cooling water is available at 90 F and costs 4 cents per 1,000 gal. The condenser
is to operate 7200 hr/yr.
a. What is the optimum heat transfer area for the condenser?
b. What is the corresponding cooling-water rate, expressed as lb mass/hr
and the temperature at which the water leaves the condenser?
c. What is the annual fixed expenses and the annual water expense?
d. Are there any process limitations? If there are, discuss them, indicating
what remedies are available.
13.9 You are employed as a chemical engineer in the production department of
Excalibar Chemicals, a company that produces large-volume inorganic
chemicals. One of our processes produces 100 tons stream day of 50% caustic
via the electrolytic decomposition of a water solution of NaCl. Since you have
only recently been placed in charge of the caustic unit, you are checking for
optimum operation of the unit. See Figure 13.9 for schematic sketch of system.
The evaporator is obsolete and needs to be replaced at this time. The cell and filter
are in good shape. You have gathered the following information:
1. Caustic is produced via the following reaction:

2 NaCl þ 2 H2 O ¼ 2 NaOH þ Cl2 þ H2

2. The process flow diagram is found in Figure 13.9.

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 356
FIGURE 13.9 Schematic diagram for Problem 13.9.

Chapter 13
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The Economic Balance 357

FIGURE 13.10 Operating expenses as a function of NaCl concentration.

3. The operating expense for the electrolytic cell plus all other upstream
expenses is given in Figure 13.10, in dollars per ton of Cl2, produced as
a function of the percent conversion of the NaCl in the feed.
4. Your material balance calculations have shown that 100 tons stream
day (4167 lb/hr of NaOH and 4167 lb/hr of H2O) of 50% caustic is
equivalent to 104 lb moles/hr of NaOH. The mole balance is
104 NaCl þ 104 H2 O ¼ 104 NaOH þ 52 Cl2 þ 52 H2
5. The filter feed (FF) must have 4167 lb/hr of NaOH and 4167 lb/hr of
H2O since only NaCl is removed in the filter. Filter cost is independent
of the NaCl concentration in FF.
6. Evaporator capital cost is given by

2 0:8
Aft
200; 000
100

Evaporator operating expense is steam only at $5.00/1000 lb.

Evaporator economy is 0.8 lb evaporated/lb steam.
Evaporator heat transfer coefficient is 200 Btu/hrft2 F.
Steam is available at 350 F and the evaporator pressure is such that the
caustic solution boils at 230 F.

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358 Chapter 13

7. The unit will operate 330 days/yr.

8. Depreciation is 20%/yr and the return is 30%/yr.
Determine the percent conversion of NaCl in the cells, and the evaporator
size, ft2, for minimum total annual expense. Perform additional mass balance
calculations in lb/hr.
13.10 It is desired to size a heat exchanger and pump system to process a dilute
aqueous solution as shown in Figure 13.11. The physical properties of the
solution may be taken as those for water. The solution is heated in the tubes of the
exchanger using 50 psig steam. The saturation temperature of 50 psig steam is
298 F. The pressure in the distillation column is 1 atmosphere and here the
solution boils at 212 F. The heat exchanger tubes in this design are 1 in. O.D.,
16 BWG, 8 ft long with an I.D. of 0.870 in. The heat exchanger is single pass. No
boiling takes place in the reboiler. Because of the tendency of the tubes to foul,
the solution is heated from 212 F to some higher temperature that depends on the
pumping rate. Therefore, the pressure on the inlet side of the valve must be
controlled to be at least high enough that no boiling takes place in the tubes. For
design purposes, this pressure is found by determining the saturation pressure

FIGURE 13.11 High-velocity forced convection reboiler layout.

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The Economic Balance 359

FIGURE 13.12 Variation of fouled heat transfer coefficient with velocity.

from the steam tables for the outlet temperature from the exchanger and adding
2 psi for safety.
Pilot plant data on the variation of the overall heat transfer coefficient U
with the tube side velocity is found in Figure 13.12. These values of U are those
that become constant after the unit is in operation for a short time at a given tube
side velocity. The shape of the curve is determining by the fouling characteristics
of the solution.
The total equivalent length of pipe from A to C is 30 ft and from D to E is
18 ft. The pipe is 8 in Schedule 40. The pressure drop through the strainer is four
velocity heads, i.e, 4v 2/2gc. The pressure drop at the inlet and outlet headers of
the exchanger may be assumed to be two velocity heads.
Assume the head developed by the pump must overcome the friction in
the system and the pressure drop across the valve. Values for DH f have been
determined in terms of velocities in the heat exchanger tubes as follows:

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360 Chapter 13

u, ft/sec 5 8 10 13 15 17 20
DHf /ft tube 0.86 2.2 3.4 5.8 7.7 9.9 13.7

Data:
Delivered pump cost ¼ $1300ðH actual Þ0:5
Reboiler cost delivered ¼ $400 A 0:62
where
A ¼ the outside heat transfer are of the tubes
Pump efficiency ¼ 70%
Maintenance charges on reboiler ¼ $1500/yr
Maintenance charges on the pump ¼ $2500/yr
Cost of steam ¼ $3.00/1000 lb
Cost of electricity ¼ $0.04/kWh
Stream time ¼ 8000 hr/yr
Insurance and property taxes ¼ 2% per year of the installed cost
Federal income taxes ¼ 35%
Depreciation ¼ 7-year straight-line
Annual net profit after taxes ¼ 15% based on the installed cost
The solution should specify the velocity in the tubes and the outside heat
transfer area of the exchanger as well as the actual horsepower of the pump for
the optimum operating conditions and costs.

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