1.A plant is designed to produce 10000 t/year of product. Total fixed capital in

1.A plant is designed to produce 10000 t/year
of product. Total fixed capital investment is $1250000 and the plant operates
about 8400 h/yr.Working capital is 5%
of annual sales revenue. It is a highly automated continuous process involving
four processing steps. Plant overhead is 50% of labor payroll.Supervision cost is $20000 per year.Repairs and maintenance cost is 10% of FCI
for the first year and then increase by $15000 each year.The plant life is 10 years and the company
accountant uses the sum-of-the-years-digits method for depreciation.Salvage value of the plant is $0.0.Selling and distribution costs are $20 per
ton of product.General overheads are
10% of sales revenue.Tax rate is
50%.Each ton of product requires: 1400 kg. raw material
at $.29/kg.280 Kwh electricity at
$0.015/Kwh4500 kg. steam at
$1.5/1000 kg30 cubic m. cooling
water at $0.25 per cubic m.25 cubic m. of natural
gas at $0.05 per cubic m.A) What
price should the company charge for the product in order to have a discounted
rate of return of 30%? B)
Determine the profitability of the project and plot the cash flow position if
it operates at 50% of full capacity for the first year and at 75% of full
capacity for the second year.Take imas 0.15.Hint:Use the following equation for estimating
operating labor cost ($10/man-hr)
3where L =
10