Chapter 3 – Financial Aspect

The chapter will discuss financial aspect of the plant. The main object of the

designers is to minimize the cost of the designed plant, not just the capital cost of the

plant to be erected, but as much as possible the operating cost of the plant also.

Profit maximization is the other half of the mentioned objective. Minimizing the cost

will not be that fruitful if the designers cannot maximize the income of the plant.

The capital cost estimation of the plant is divided into two parts: fixed capital

and working capital. The capital needed to supply the necessary manufacturing and

plant facilities is called the fixed-capital investment, while that necessary for the

operation of the plant is termed the working capital (Peters & Timmerhaus, 1991).

Fixed Capital

Fixed capital is composed of the following: Inside Battery Limits(ISBL)

Capital, Outside Battery Limits (OSBL) Capital, Engineering & Construction and

Contingency funds.

Inside Battery limits (ISBL) Capital

ISBL is often defined as the "inner" cost of the plant, in that it is the cost

associated with building the plant itself, from unloading the raw materials to shipping

final products. Any costs associated with developing the plant itself is considered

ISBL. The designers calculated the ISBL Capital of the plant using, historical cost

method. According to San Miguel Brewery Inc, there will be a new plant to be

constructed on 2018 and it will cost $150,000,000.00. The plant’s capacity is 3million

hectolitres. From this data, the designers calculated the ISBL Capital of the plant: