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Estimation of capital - Revision history
2024-03-28T21:12:54Z
Revision history for this page on the wiki
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https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4573&oldid=prev
WFu at 20:29, 21 February 2016
2016-02-21T20:29:03Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 15:29, 21 February 2016</td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> WCT = AR<del style="font-weight: bold; text-decoration: none;">/</del>WC</math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> WCT = <ins style="font-weight: bold; text-decoration: none;">\frac{</ins>AR<ins style="font-weight: bold; text-decoration: none;">}{</ins>WC<ins style="font-weight: bold; text-decoration: none;">}</ins></math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>WCT = Working capital turnover</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>WCT = Working capital turnover</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> DR = TD<del style="font-weight: bold; text-decoration: none;">/</del>TA</math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> DR = <ins style="font-weight: bold; text-decoration: none;">\frac{</ins>TD<ins style="font-weight: bold; text-decoration: none;">}{</ins>TA<ins style="font-weight: bold; text-decoration: none;">}</ins></math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>DR = Debt ratio</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>DR = Debt ratio</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> ROE = NAP<del style="font-weight: bold; text-decoration: none;">/</del>SE</math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> ROE = <ins style="font-weight: bold; text-decoration: none;">\frac{</ins>NAP<ins style="font-weight: bold; text-decoration: none;">}{</ins>SE<ins style="font-weight: bold; text-decoration: none;">}</ins></math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>ROE = Return on equity</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>ROE = Return on equity</div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4559&oldid=prev
WFu at 19:58, 21 February 2016
2016-02-21T19:58:14Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 14:58, 21 February 2016</td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The discussion of project financing is centered on some quantitative measures that are often used to understand the growth and profitability of a company. More importantly, these measures also give insight into the health of the company beyond common metrics of revenue and costs. </div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The discussion of project financing is centered on some quantitative measures that are often used to understand the growth and profitability of a company. More importantly, these measures also give insight into the health of the company beyond common metrics of revenue and costs. </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div><math> DR = TD/TA</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div><math> DR = TD/TA</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>TA = Total assets($)</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>TA = Total assets($)</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The debt ratio of the company can be used to understand how much risk there is on future earnings and cash flows of the company (Towler). As stated, the debt ratio is a comparison of the total debt and total assets of the company. For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The debt ratio of the company can be used to understand how much risk there is on future earnings and cash flows of the company (Towler). As stated, the debt ratio is a comparison of the total debt and total assets of the company. For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div><math> ROE = NAP/SE</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div><math> ROE = NAP/SE</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>SE = Stockholders equity($)</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>SE = Stockholders equity($)</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. As stated, the return on equity is a comparison of net annual profit and stockholder's equity. Because of this, an increasing return on equity shows that more profit is being made relative to the amount of equity invested.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. As stated, the return on equity is a comparison of net annual profit and stockholder's equity. Because of this, an increasing return on equity shows that more profit is being made relative to the amount of equity invested.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>This rate can be written as:</div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>This rate can be written as:</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div><math> i_c = DR*i_d+(1-DR)*i_e</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div><math> i_c = DR*i_d+(1-DR)*i_e</math></div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4558&oldid=prev
WFu at 19:57, 21 February 2016
2016-02-21T19:57:13Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 14:57, 21 February 2016</td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>where <math>i_c</math> is the cost of capital, <math>DR</math> is the debt ratio, <math>i_d</math> is the interest at which bonds are issued, and <math>i_e</math> is the cost of equity.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>where <math>i_c</math> is the cost of capital, <math>DR</math> is the debt ratio, <math>i_d</math> is the interest at which bonds are issued, and <math>i_e</math> is the cost of equity.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>===<del style="font-weight: bold; text-decoration: none;">Case study</del> of Project Financing: Sadara Integrated Chemicals Project===</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>===<ins style="font-weight: bold; text-decoration: none;">Example</ins> of Project Financing: Sadara Integrated Chemicals Project===</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>In 2013, one of the largest financing projects in the chemicals industry occurred in the petrochemical sector. Two of the companies that corroborated in this financing project were Dow Chemical and Saudi Aramco. At the time, Dow Chemical Co. had annual sales of over 57 billion USD and produced over 5000 products in varying sectors. Saudi Aramco was on of the largest oil companies in Saudi Arabia, and a leader in many aspects of the petrochemical sector including production, refining, shipping, and even hydrocarbon exploration.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>In 2013, one of the largest financing projects in the chemicals industry occured </div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The project financing for Sadara Chemical Company began in 2011 with the issuance of a sukuk, which often referred to as Islamic bonds. The bonds were sold at an interest rate of 2.95%. The term, or duration of the bond, was 15.75 years. In total, the sale of these bonds earned about 2 billion USD (Dewar). This was the debt financing aspect of the project financing.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Then in 2013, Dow Chemical and Saudi Aramco contributed about 17 billion USD total. In this case, the equity financing came from two well-established chemical companies. Currently, Sadara Chemical Company is evaluated at about 20 billion USD, and Saudi Aramco has 65% ownership and Dow Chemical Company has 35% ownership (Fletcher).</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The next aspect of equity financing for Sadara Chemical Company will happen in 2016, when it is scheduled for Sadara to be traded publicly after an IPO. It is anticipated that about 30% ownership in the company will be floated, or traded actively (Fletcher).</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Because the company is not currently traded, it is difficult to apply many of the quantitative measures to study the effectiveness of the project financing techniques. In addition, for companies that have recently been started, many of these quantitative measures may be skewed because of the heavy investment on research and growth. More specifically, chemical companies often do not start full production until 2-3 years after plant construction is completed. Sadara Chemical Company is planning full-scale production in mid-2016 (Fletcher). Sadara Chemical Company provides an insight into real world project financing. In addition, the magnitude of the project gained worldwide recognition.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Accuracy and purpose of Capital Cost Estimates==</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Accuracy and purpose of Capital Cost Estimates==</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Costdataonline.com. Richardson International Construction Factors Manual [Internet]. Pahrump: Cost Data On Line, Inc.; c2008- [cited 2015 Feb 26]. Available from: http://www.icoste.org/Book_Reviews/CFM-Info.pdf.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Costdataonline.com. Richardson International Construction Factors Manual [Internet]. Pahrump: Cost Data On Line, Inc.; c2008- [cited 2015 Feb 26]. Available from: http://www.icoste.org/Book_Reviews/CFM-Info.pdf.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Dewar, John. Sadara Project Sukuk: Heralding a New Era? N.p.: Butterworths Journal of International Banking and Financial Law, Mar. 2014.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>"Dow Chemical Co. (DOW) Short-term (Operating) Activity Analysis." NYSE Stock Exchange Data. Web. 5 Feb. 2016. </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>"Dow Chemical Co. (DOW) Short-term (Operating) Activity Analysis." NYSE Stock Exchange Data. Web. 5 Feb. 2016. </div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Fletcher, Phillip, et al. Sadara – Redefining the Possible. N.p.: MILBANK TWEED HADLEY & MCCLOY LLP, Sept. 2013.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Garrett DE. Chemical Engineering Economics. 1st ed. New York: Van Nostrand Reinhold; 1989. p. 36-72.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Garrett DE. Chemical Engineering Economics. 1st ed. New York: Van Nostrand Reinhold; 1989. p. 36-72.</div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4346&oldid=prev
WFu at 23:44, 20 February 2016
2016-02-20T23:44:10Z
<p></p>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Equity Financing===</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>Equity financing is accomplished through the sale of stock, also known as equity, in the company. In other words, the company is selling ownership interest in order to achieve a certain amount of funds. In chemical companies, <del style="font-weight: bold; text-decoration: none;">mergers</del> and takeovers can occur when one company assumes majority ownership of another company.<del style="font-weight: bold; text-decoration: none;"> </del></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Equity financing is accomplished through the sale of stock, also known as equity, in the company. In other words, the company is selling ownership interest in order to achieve a certain amount of funds<ins style="font-weight: bold; text-decoration: none;">. Equity financing occurs throughout the lifetime of a company</ins>. In<ins style="font-weight: bold; text-decoration: none;"> the beginning and startup of the company, angel investors and venture capitalists are the major contributors to equity financing. Both give capital in order to obtain equity in the company. The chemical industry has angel investors and venture capitalists who operate as individuals, and there are groups of individuals with the same interests who pool money in order to have a larger ownership interest. As</ins> chemical companies<ins style="font-weight: bold; text-decoration: none;"> grow</ins>, <ins style="font-weight: bold; text-decoration: none;">many decide to become publicly traded, or "go public". This involves an initial public offering (IPO) and the beginning of trading of the company's stock on stock exchanges. However, private companies can still sell stocks. Mergers</ins> and takeovers can occur when one company assumes majority ownership of another company.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Quantitative Measures===</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Quantitative Measures===</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>This rate can be written as:</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>This rate can be written as:</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> i_c = <del style="font-weight: bold; text-decoration: none;">(</del>DR*i_d+<del style="font-weight: bold; text-decoration: none;">(</del>(1-DR)*i_e</math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> i_c = DR*i_d+(1-DR)*i_e</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>where <math>i_c</math> is the cost of capital, <math>DR</math> is the debt ratio, <math>i_d</math> is the interest at which bonds are issued, and <math>i_e</math> is the cost of equity.</div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>where <math>i_c</math> is the cost of capital, <math>DR</math> is the debt ratio, <math>i_d</math> is the interest at which bonds are issued, and <math>i_e</math> is the cost of equity.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>===Case study of Project Financing: Sadara Integrated Chemicals Project===</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>In 2013, one of the largest financing projects in the chemicals industry occured </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Accuracy and purpose of Capital Cost Estimates==</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Accuracy and purpose of Capital Cost Estimates==</div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4345&oldid=prev
WFu at 23:33, 20 February 2016
2016-02-20T23:33:07Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 18:33, 20 February 2016</td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> WCT = AR/WC</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> WCT = AR/WC<ins style="font-weight: bold; text-decoration: none;"></math></ins></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>WCT<del style="font-weight: bold; text-decoration: none;">:</del> Working<del style="font-weight: bold; text-decoration: none;">\</del> capital<del style="font-weight: bold; text-decoration: none;">\</del> turnover</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>WCT<ins style="font-weight: bold; text-decoration: none;"> =</ins> Working capital turnover</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>AR<del style="font-weight: bold; text-decoration: none;">:</del> Annual<del style="font-weight: bold; text-decoration: none;">\</del> revenues($)</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>AR<ins style="font-weight: bold; text-decoration: none;"> =</ins> Annual revenues($)</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>WC<del style="font-weight: bold; text-decoration: none;">:</del>Working<del style="font-weight: bold; text-decoration: none;">\</del> capital($)</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>WC<ins style="font-weight: bold; text-decoration: none;"> </ins>Working capital($)</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div></math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The discussion of project financing is centered on some quantitative measures that are often used to understand the growth and profitability of a company. More importantly, these measures also give insight into the health of the company beyond common metrics of revenue and costs. </div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The discussion of project financing is centered on some quantitative measures that are often used to understand the growth and profitability of a company. More importantly, these measures also give insight into the health of the company beyond common metrics of revenue and costs. </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> <del style="font-weight: bold; text-decoration: none;">Debt\</del> <del style="font-weight: bold; text-decoration: none;">ratio(DR)</del>= <del style="font-weight: bold; text-decoration: none;">Total\ debt($)</del>/<del style="font-weight: bold; text-decoration: none;">Total\ assets($)</del></math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> <ins style="font-weight: bold; text-decoration: none;">DR</ins> = <ins style="font-weight: bold; text-decoration: none;">TD</ins>/<ins style="font-weight: bold; text-decoration: none;">TA</ins></math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>DR = Debt ratio</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>TD = Total debt($)</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>TA = Total assets($)</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The debt ratio of the company can be used to understand how much risk there is on future earnings and cash flows of the company (Towler). As stated, the debt ratio is a comparison of the total debt and total assets of the company. For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. </div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The debt ratio of the company can be used to understand how much risk there is on future earnings and cash flows of the company (Towler). As stated, the debt ratio is a comparison of the total debt and total assets of the company. For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> <del style="font-weight: bold; text-decoration: none;">Return\ on\ equity(</del>ROE<del style="font-weight: bold; text-decoration: none;">)</del> = <del style="font-weight: bold; text-decoration: none;">Net\ annual\ profit($)</del>/<del style="font-weight: bold; text-decoration: none;">Stockholders\ equity($)</del></math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> ROE = <ins style="font-weight: bold; text-decoration: none;">NAP</ins>/<ins style="font-weight: bold; text-decoration: none;">SE</ins></math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. As stated, the return on equity is a comparison of net annual profit and stockholder's equity. Because of this, an increasing return on equity shows that more profit is being made relative to the amount of equity invested.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. As stated, the return on equity is a comparison of net annual profit and stockholder's equity. Because of this, an increasing return on equity shows that more profit is being made relative to the amount of equity invested.</div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4342&oldid=prev
WFu at 23:30, 20 February 2016
2016-02-20T23:30:02Z
<p></p>
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 18:30, 20 February 2016</td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Project Financing==</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Project Financing==</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>Because of the magnitude of costs associated with the start-up and maintenance of a chemical plant, there are often different project financing methods required to cover the capital needs. The two main methods of project financing are debt and equity financing. Debt financing usually involves the issuing of bonds. Equity financing<del style="font-weight: bold; text-decoration: none;"> usually</del> involves the issuing of common stock. However, most companies utilize a combination of these two methods to successfully finance a project.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Because of the magnitude of costs associated with the start-up and maintenance of a chemical plant, there are often different project financing methods required to cover the capital needs. The two main methods of project financing are debt and equity financing. Debt financing usually involves the issuing of bonds. Equity financing involves the issuing of common stock. However, most companies utilize a combination of these two methods to successfully finance a project.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>As stated, the debt financing involves the issuing of bonds. Buyers of the bonds can be either individual investors or banks and others institutional investors. After the bond is sold, the company who sold the bond is now in debt to the buyer. The buyer is also known as a creditor, and has priority over a stockholder in the event of a bankruptcy in the company. Bonds can have a variety of different capital amounts, also known as bond principle. In addition, bonds can have a variety of different payback times and interest rates. An interesting application of debt financing is for seasonal products. A company could release short term bonds in order to make the stream of revenue more consistent. During times of low sales, they could sell bonds, and during times of high sales, they could pay back bonds.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Equity financing is accomplished through the sale of stock, also known as equity, in the company. In other words, the company is selling ownership interest in order to achieve a certain amount of funds. In chemical companies, mergers and takeovers can occur when one company assumes majority ownership of another company. </div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4009&oldid=prev
WFu at 03:19, 6 February 2016
2016-02-06T03:19:57Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 22:19, 5 February 2016</td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> Working\ capital\ turnover = Annual\ revenues($)/Working\ capital($)</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The discussion of project financing is centered on some quantitative measures that are often used to understand the growth and profitability of a company. More importantly, these measures also give insight into the health of the company beyond common metrics of revenue and costs. </div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> Debt\ ratio<del style="font-weight: bold; text-decoration: none;">\ </del>(DR)= Total\ debt($)/Total\ assets<del style="font-weight: bold; text-decoration: none;">\ </del>($)</math></div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> Debt\ ratio(DR)= Total\ debt($)/Total\ assets($)</math></div></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The debt ratio of the company can be used to understand how much risk there is on future earnings and cash flows of the company (Towler). As stated, the debt ratio is a comparison of the total debt and total assets of the company. For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. </div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The debt ratio of the company can be used to understand how much risk there is on future earnings and cash flows of the company (Towler). As stated, the debt ratio is a comparison of the total debt and total assets of the company. For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. </div></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<tr>
<td class="diff-marker" data-marker="−"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> Return\ on\ equity<del style="font-weight: bold; text-decoration: none;">\ </del>(ROE) = Net\ annual\ profit<del style="font-weight: bold; text-decoration: none;">\</del>($)/Stockholders\ equity<del style="font-weight: bold; text-decoration: none;">\ </del>($)</math></div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> Return\ on\ equity(ROE) = Net\ annual\ profit($)/Stockholders\ equity($)</math></div></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker" data-marker="−"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. As stated, the return on equity is a comparison of net annual profit and stockholder's equity.</div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. As stated, the return on equity is a comparison of net annual profit and stockholder's equity<ins style="font-weight: bold; text-decoration: none;">. Because of this, an increasing return on equity shows that more profit is being made relative to the amount of equity invested</ins>.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker" data-marker="−"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>Another important measure is the cost of equity. This measure is the expected return </div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Another important measure is the cost of equity. This measure is the expected return <ins style="font-weight: bold; text-decoration: none;">for any given cost in a company. The expected return is a combination of the dividends the company pays and the growth of the company's stock price. The cost used in this calculation is usually the stock price of the company.</ins></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Cost of Capital===</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Cost of Capital===</div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=4008&oldid=prev
WFu at 03:15, 6 February 2016
2016-02-06T03:15:38Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">← Older revision</td>
<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 22:15, 5 February 2016</td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The working capital of a plant provides liquidity and flexibility as it is cash kept in reserve. It can be thought of as money that is needed to address irregularities in process operation, that may or may not be spent. There are many aspects of plant operation that are considered when making an estimation for how much working capital is needed. The value of inventory, the value of products and by-products, magnitude of accounts payable, magnitude of accounts receivable, process equipment spare parts costs. When all of these factors are taken into account, a useful estimate of working capital needed is approximately seven weeks of productions costs minus two weeks of feedstocks costs (Towler). Another suggested estimation of working capital is 10-20% of annual operating costs (Garrett). Both of these should be used as initial estimates, but further analysis of the aforementioned factors will yield a more useful value for working capital.</div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The working capital of a plant provides liquidity and flexibility as it is cash kept in reserve. It can be thought of as money that is needed to address irregularities in process operation, that may or may not be spent. There are many aspects of plant operation that are considered when making an estimation for how much working capital is needed. The value of inventory, the value of products and by-products, magnitude of accounts payable, magnitude of accounts receivable, process equipment spare parts costs. When all of these factors are taken into account, a useful estimate of working capital needed is approximately seven weeks of productions costs minus two weeks of feedstocks costs (Towler). Another suggested estimation of working capital is 10-20% of annual operating costs (Garrett). Both of these should be used as initial estimates, but further analysis of the aforementioned factors will yield a more useful value for working capital.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>But it must be noted that for chemical plants of different processes, the individual factors that affect working capital can have large variance, and the aforementioned estimate will not work well for all situations. A simple example of unique characteristic that affects the size of working capital is the seasonality of a product. </div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>But it must be noted that for chemical plants of different processes, the individual factors that affect working capital can have large variance, and the aforementioned estimate will not work well for all situations. A simple example of unique characteristic that affects the size of working capital is the seasonality of a product. <ins style="font-weight: bold; text-decoration: none;">The working capital for a plant that produces a seasonal product may have a far larger working capital than a company that is not seasonal but has similar annual production. This is because the needs during the time when the product is in season has a more significant impact on the sales. Therefore, it is vital to ensure needs are met during the season.</ins></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>====Working Capital Turnover====</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>====Working Capital Turnover====</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>The objective for any plant is to maximize the working capital turnover. There are two ways to accomplish this: increase annual revenues or decrease working capital. The second method is very simple to enact; rather than holding cash as working capital, it can be used in other aspects of the plant operations. There exists a relationship between revenue and working capital because of the aforementioned risk of being unable to address unexpected operations needs. In cases of low working capital, replacing faulty equipment may take long periods of time. This will correspond to down time for the process and decreased production and decreased revenues. Careful risk analysis will identify how to optimize the working capital turnover ratio. Below are different working capital ratios for different companies over a 5-year period.</div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The objective for any plant is to maximize the working capital turnover. There are two ways to accomplish this: increase annual revenues or decrease working capital. The second method is very simple to enact; rather than holding cash as working capital, it can be used in other aspects of the plant operations. There exists a relationship between revenue and working capital because of the aforementioned risk of being unable to address unexpected operations needs. In cases of low working capital, replacing faulty equipment may take long periods of time. This will correspond to down time for the process and decreased production and decreased revenues. Careful risk analysis will identify how to optimize the working capital turnover ratio. Below are different working capital<ins style="font-weight: bold; text-decoration: none;"> turnover</ins> ratios for different companies over a 5-year period.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>3.81 3.24 4.56 5.52 –</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>LyondellBasell Industries N.V. 7.35 4.85 6.31 7.95 –</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>Praxair Inc. 35.17 47.32 35.86 156.28 37.75</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>{| class="wikitable" style="margin: 1em auto 1em auto;"</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>{| class="wikitable" style="margin: 1em auto 1em auto;"</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>|+ '''Example working capital turnover ratios'''</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>! Date:</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>! Dec 31, 2014</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>! Dec 31, 2014</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>| 37.75</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>| 37.75</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Project Financing==</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>Because of the magnitude of costs associated with the start-up of a chemical plant, there are often different project financing methods required to cover <del style="font-weight: bold; text-decoration: none;">these</del> <del style="font-weight: bold; text-decoration: none;">costs</del>. </div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Because of the magnitude of costs associated with the start-up<ins style="font-weight: bold; text-decoration: none;"> and maintenance</ins> of a chemical plant, there are often different project financing methods required to cover <ins style="font-weight: bold; text-decoration: none;">the</ins> <ins style="font-weight: bold; text-decoration: none;">capital needs</ins>. <ins style="font-weight: bold; text-decoration: none;">The two main methods of project financing are debt and equity financing. Debt financing usually involves the issuing of bonds. Equity financing usually involves the issuing of common stock. However, most companies utilize a combination of these two methods to successfully finance a project.</ins></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>===<del style="font-weight: bold; text-decoration: none;">Debt</del> <del style="font-weight: bold; text-decoration: none;">Financing</del>===</div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>===<ins style="font-weight: bold; text-decoration: none;">Quantitative</ins> <ins style="font-weight: bold; text-decoration: none;">Measures</ins>===</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The discussion of project financing is centered on some quantitative measures that are often used to understand the growth and profitability of a company. More importantly, these measures also give insight into the health of the company beyond common metrics of revenue and costs. </div></td>
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<td class="diff-marker"><a class="mw-diff-movedpara-left" title="Paragraph was moved. Click to jump to new location." href="#movedpara_18_0_rhs">⚫</a></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><a name="movedpara_16_0_lhs"></a><math> Debt\ ratio = <del style="font-weight: bold; text-decoration: none;">Annual\ Revenues</del>\ ($)/<del style="font-weight: bold; text-decoration: none;">Working</del>\ <del style="font-weight: bold; text-decoration: none;">Capital</del>\ ($)</math></div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker"><a class="mw-diff-movedpara-right" title="Paragraph was moved. Click to jump to old location." href="#movedpara_16_0_lhs">⚫</a></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><a name="movedpara_18_0_rhs"></a><math> Debt\ ratio<ins style="font-weight: bold; text-decoration: none;">\</ins> <ins style="font-weight: bold; text-decoration: none;">(DR)</ins>= <ins style="font-weight: bold; text-decoration: none;">Total</ins>\ <ins style="font-weight: bold; text-decoration: none;">debt</ins>($)/<ins style="font-weight: bold; text-decoration: none;">Total</ins>\ <ins style="font-weight: bold; text-decoration: none;">assets</ins>\ ($)</math></div></td>
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<td class="diff-marker" data-marker="−"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>===Equity Financing===</div></td>
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<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The debt ratio of the company can be used to understand how much risk there is on future earnings and cash flows of the company (Towler). As stated, the debt ratio is a comparison of the total debt and total assets of the company. For companies with large debt ratios, the interest that is deducted from earnings will be large because of the large amount of debt carried. </div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> Return\ on\ equity\ (ROE) = Net\ annual\ profit\($)/Stockholders\ equity\ ($)</math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The return on equity can be used to understand how effectively the company is managed from a fiscal point of view. As stated, the return on equity is a comparison of net annual profit and stockholder's equity.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Another important measure is the cost of equity. This measure is the expected return </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Cost of Capital===</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Cost of Capital===</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>With the quantitative measures discussed in the previous section, an overall cost of capital can be calculated. This value is an interest rate that is the effective rate at which all of the capital is raised. This is the most useful measure for the economic evaluation of capital needed for projects.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>This rate can be written as:</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> i_c = (DR*i_d+((1-DR)*i_e</math></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>where <math>i_c</math> is the cost of capital, <math>DR</math> is the debt ratio, <math>i_d</math> is the interest at which bonds are issued, and <math>i_e</math> is the cost of equity.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Accuracy and purpose of Capital Cost Estimates==</div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=3996&oldid=prev
WFu at 02:38, 6 February 2016
2016-02-06T02:38:02Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 21:38, 5 February 2016</td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>The objective for any plant is to maximize the working capital turnover. There are two ways to accomplish this: increase annual revenues or decrease working capital. The second method is very simple to enact; rather than holding cash as working capital, it can be used in other aspects of the plant operations. There exists a relationship between revenue and working capital because of the aforementioned risk of being unable to address unexpected operations needs. In cases of low working capital, replacing faulty equipment may take long periods of time. This will correspond to down time for the process and decreased production and decreased revenues. Careful risk analysis will identify how to optimize the working capital turnover ratio.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The objective for any plant is to maximize the working capital turnover. There are two ways to accomplish this: increase annual revenues or decrease working capital. The second method is very simple to enact; rather than holding cash as working capital, it can be used in other aspects of the plant operations. There exists a relationship between revenue and working capital because of the aforementioned risk of being unable to address unexpected operations needs. In cases of low working capital, replacing faulty equipment may take long periods of time. This will correspond to down time for the process and decreased production and decreased revenues. Careful risk analysis will identify how to optimize the working capital turnover ratio<ins style="font-weight: bold; text-decoration: none;">. Below are different working capital ratios for different companies over a 5-year period</ins>.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>! Dec 31, 2014</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>! Dec 31, 2013</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>! Dec 31, 2012</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>! Dec 31, 2011</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>! Dec 31, 2010</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>|-</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| Dow Chemical Co.</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 4.59 </div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 4.39</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 4.66</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 6.13</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 5.24</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>|-</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| E. I. du Pont de Nemours & Co.</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 3.81</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 3.24</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 4.56</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 5.52</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| -</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>|-</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| LyondellBasell Industries N.V.</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 7.35</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 4.85</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 6.31</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 7.95</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| –</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>|-</div></td>
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<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| Praxair Inc. </div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 35.17</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 47.32</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 35.86</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 156.28</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>| 37.75</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>|}</div></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Project Financing==</div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Project Financing==</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Costdataonline.com. Richardson International Construction Factors Manual [Internet]. Pahrump: Cost Data On Line, Inc.; c2008- [cited 2015 Feb 26]. Available from: http://www.icoste.org/Book_Reviews/CFM-Info.pdf.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Costdataonline.com. Richardson International Construction Factors Manual [Internet]. Pahrump: Cost Data On Line, Inc.; c2008- [cited 2015 Feb 26]. Available from: http://www.icoste.org/Book_Reviews/CFM-Info.pdf.</div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>"Dow Chemical Co. (DOW) Short-term (Operating) Activity Analysis." NYSE Stock Exchange Data. Web. 5 Feb. 2016. </div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Garrett DE. Chemical Engineering Economics. 1st ed. New York: Van Nostrand Reinhold; 1989. p. 36-72.</div></td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Garrett DE. Chemical Engineering Economics. 1st ed. New York: Van Nostrand Reinhold; 1989. p. 36-72.</div></td>
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WFu
https://processdesign.mccormick.northwestern.edu/index.php?title=Estimation_of_capital&diff=3987&oldid=prev
WFu at 02:21, 6 February 2016
2016-02-06T02:21:13Z
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 21:21, 5 February 2016</td>
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<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;">The</del> working capital<del style="font-weight: bold; text-decoration: none;"> turnover</del> is a <del style="font-weight: bold; text-decoration: none;">metric</del> that <del style="font-weight: bold; text-decoration: none;">is</del> <del style="font-weight: bold; text-decoration: none;">used</del> <del style="font-weight: bold; text-decoration: none;">to</del> <del style="font-weight: bold; text-decoration: none;">determine</del> <del style="font-weight: bold; text-decoration: none;">how</del> <del style="font-weight: bold; text-decoration: none;">efficiently</del> <del style="font-weight: bold; text-decoration: none;">the</del> <del style="font-weight: bold; text-decoration: none;">working</del> <del style="font-weight: bold; text-decoration: none;">capital</del> <del style="font-weight: bold; text-decoration: none;">is managed</del>. If the working capital is too low, it may not cover the costs of operations during a particular period of time. If the working capital is too high, it can be considered cash that is not gaining interest or value. </div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><ins style="font-weight: bold; text-decoration: none;">Optimization of</ins> working capital is a <ins style="font-weight: bold; text-decoration: none;">consideration</ins> that <ins style="font-weight: bold; text-decoration: none;">can</ins> <ins style="font-weight: bold; text-decoration: none;">greatly</ins> <ins style="font-weight: bold; text-decoration: none;">affect</ins> <ins style="font-weight: bold; text-decoration: none;">the</ins> <ins style="font-weight: bold; text-decoration: none;">success</ins> <ins style="font-weight: bold; text-decoration: none;">and</ins> <ins style="font-weight: bold; text-decoration: none;">growth</ins> <ins style="font-weight: bold; text-decoration: none;">of</ins> <ins style="font-weight: bold; text-decoration: none;">a</ins> <ins style="font-weight: bold; text-decoration: none;">company</ins>. If the working capital is too low, it may not cover the costs of operations during a particular period of time. If the working capital is too high, it can be considered cash that is not gaining interest or value. <ins style="font-weight: bold; text-decoration: none;">The working capital turnover is a metric that is used to determine how efficiently the working capital is managed. Simply stated:</ins></div></td>
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<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><math> Working\ <del style="font-weight: bold; text-decoration: none;">Capital</del>\ <del style="font-weight: bold; text-decoration: none;">Turnover</del> = <del style="font-weight: bold; text-decoration: none;">(</del>Annual\ <del style="font-weight: bold; text-decoration: none;">Revenues</del>\ ($<del style="font-weight: bold; text-decoration: none;">)</del>)/<del style="font-weight: bold; text-decoration: none;">(</del>Working\ <del style="font-weight: bold; text-decoration: none;">Capital</del>\ ($<del style="font-weight: bold; text-decoration: none;">)</del>)</math></div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> Working\ <ins style="font-weight: bold; text-decoration: none;">capital</ins>\ <ins style="font-weight: bold; text-decoration: none;">turnover</ins> = Annual\ <ins style="font-weight: bold; text-decoration: none;">revenues</ins>\ ($)/Working\ <ins style="font-weight: bold; text-decoration: none;">capital</ins>\ ($)</math></div></td>
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<tr>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<tr>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<tr>
<td class="diff-marker" data-marker="−"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>The objective for any plant is to maximize the working capital turnover. There are two ways to accomplish this: increase annual revenues or decrease working capital. The second method is very simple to enact; rather than holding cash as working capital, it can be used in other aspects of the plant operations. Careful analysis will identify </div></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The objective for any plant is to maximize the working capital turnover. There are two ways to accomplish this: increase annual revenues or decrease working capital. The second method is very simple to enact; rather than holding cash as working capital, it can be used in other aspects of the plant operations<ins style="font-weight: bold; text-decoration: none;">. There exists a relationship between revenue and working capital because of the aforementioned risk of being unable to address unexpected operations needs. In cases of low working capital, replacing faulty equipment may take long periods of time. This will correspond to down time for the process and decreased production and decreased revenues</ins>. Careful<ins style="font-weight: bold; text-decoration: none;"> risk</ins> analysis will identify <ins style="font-weight: bold; text-decoration: none;">how to optimize the working capital turnover ratio.</ins></div></td>
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<tr>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
</tr>
<tr>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Project Financing==</div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>==Project Financing==</div></td>
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<tr>
<td colspan="2" class="diff-lineno">Line 65:</td>
<td colspan="2" class="diff-lineno">Line 65:</td>
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<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
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<tr>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Debt Financing===</div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Debt Financing===</div></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><br /></td>
</tr>
<tr>
<td colspan="2" class="diff-empty diff-side-deleted"></td>
<td class="diff-marker" data-marker="+"></td>
<td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><math> Debt\ ratio = Annual\ Revenues\ ($)/Working\ Capital\ ($)</math></div></td>
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<tr>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br /></td>
</tr>
<tr>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Equity Financing===</div></td>
<td class="diff-marker"></td>
<td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Equity Financing===</div></td>
</tr>
</table>
WFu