Appendix B:: Solutions To All Exercises

157
APPENDIX B:
Solutions to All Exercises
Unit 2
2-1. The most appropriate measure is percentage within limits, between 195 and
205C. This measure has a direct impact on process performance.
2-2. Use of the new control system, without operating changes, will improve
neither the production nor the efficiency of the process.
2-3. A decrease in set point to 21% A will improve process yield with respect to
component A without producing any off-spec material.
2-4. Year Scenario A Scenario B
0 -$15,000 -$15,000
1 4,000 -5,000
2 4,000 4,000
3 4,000 4,000
4 4,000 4,000
5 4,000 4,000
2-5. Scenario A 3.75 year payback
Scenario B payback is never reached, since the revenue stream stops
before costs are recovered.
2-6. Projects A and X would be funded, since payback for X is now shorter than
that for Project C.
2-7. The scenarios can be combined by weighting them according to their
probabilities, so each entry in the combined cash flow table = 0.7
(Scenario A entry) + 0.3 (Scenario B entry).
Year Combined Scenario
0 -$15,000
1 1,300
2 4,000
3 4,000
4 4,000
5 4,000
Friedmann05.book Page 157 Tuesday, June 13, 2006 11:31 AM
158 APPENDIX B: Solutions to All Exercises
Unit 3
3-1.
(a) Multistep batch process-increased production
(b) Intermittent high power usage-utility cost saving by load leveling
(c) Continuous process with frequent changes in product grades-
increased production and increased yield
(d) Occasional effluent contamination cost savings from reduced fines
and indirect labor savings from less reporting
(e) Customer pays bonus for each month without defective product-
increased revenue from higher quality
3-2. The control improvement allows a yield increase from 63 to 76% of feed.
Since the bottoms stream is the only other outlet from the process, its flow
rate will be reduced from 37 to 24% of feed. This reduction can be claimed
as a benefit, since the bottoms stream is an unwanted byproduct that must
be discarded.
3-3. Among the likely benefits are the following:
Reduction of repair costs
Increased production, since the shutdowns caused by fires are avoided
Avoidance of air pollution citations for smoke
A safer plant, possibly reducing insurance premiums
3-4. The operating time for the separation process should be shortened to 2
hours, maintaining the concentration of B in the product at 20%. This will
allow production to be increased, since this process has been the limiting
factor. Holding the operating time and decreasing the concentration of B in
the product will decrease production, since throughput is not increased and
Fig. 3-7 shows that yield will be lower.
3-5. No action can be taken that is certain to produce a benefit. More production
is not wanted, since the plant is market-limited. Yield cannot be increased,
since the yield vs. concentration curve is unchanged and product barely
meets specifications. Speeding up the process at the same concentration
may allow savings in labor costs or working capital, depending on the
particular circumstances of the plant.
3-6. Given a two-grade price structure, a possible option is to shift all or part of
production to the higher grade. The increase in product price must be
balanced against lower yields at the higher concentration.
APPENDIX B: Solutions to All Exercises 159
Unit 4
4-1. The constraint must be soft, since it is occasionally violated.
4-2. Increasing the set point to 119C from 115C would require an 80%
reduction in temperature range from 5C to 1C to keep liquid
temperature under 120C. Since the temperature loop is already under
feedback control, this does not seem likely. A more reasonable expectation
for the addition of cascade control would be a 40 to 50% reduction of
temperature range, allowing a set point of 117C.
4-3. Benefit
Year Cash Flow
0 0
1 0 (all displaced workers still on payroll)
2 17,500 (one worker retires at midyear)
3 105,000 (two workers replace retiring operators)
4 140,000
: :
10 140,000
4-4. Substituting into Eq. (4-1),
4-5. Savings per kg of product will be (460 400) ppm $0.01 = $0.60. There
will be no change in the fraction of product (5%) exceeding 500 ppm X,
since the change in set point will preserve the relationship between the
controlled variable distribution and the constraint.
4-6. Overall costs will decrease by $0.05/kg if a set point of 470 rather than
460 ppm is used. Operating costs will decrease by (470 460) $0.01 =
$0.10/kg, while recycle costs will increase by (0.10 0.05) $1.00 =
$0.05/kg. Costs will be the same at 470 and 480 ppm, so the optimum set
point is probably somewhere between these values.
Unit 5
5-1. Let x = % expected error for the remaining costs.
0.6(15) + 0.4x = 20
x = (20 9)/0.4 = 27.5%
500 400 ( )
100
----------------------------
500 SP
2
( )
40
----------------------------- =
SP
2
460 ppm =
5-2. Among the significant costs will be those for instrumentation, application
software, installation, and commissioning. Of these, instrumentation is
likely to be the largest item. Some maintenance training on the new sensors
will have to be provided. Maintenance costs may change slightly; the in-
situ oxygen probe will be cheaper to maintain, but the CO measurement
will take some work.
5-3. Probably not. Unless you are intimately familiar with the particular make
of DCS, you are likely to spend more time trying to understand the existing
code than you would starting from scratch.
5-4. This is almost certainly a low estimate. Adapting these packages to share
data and work together in real time is not a trivial job (see Reference 4 of
Unit 5).. The additional cost is likely to be nearer 100% of individual costs
than 10%.
Unit 6
6-1. Payback is concerned only with how fast the capital expenditure bait is
recovered and does not consider the size of the fish that is caught.
6-2. Payback time to recoup the first cost of $530,000 is 3.81 years from the
start of operation. Average earnings are $1,040,000/7 = $148,600, so ROI
= 100 148,600/530,000 = 28%. Net present value at a discount rate of
10% is $153,600. Internal rate of return is 17.9%.
6-3. Substituting into Eq. (6-4),
PV = FV
n
/(l + k)
n

0.497= 1/(1 + k)
5

Rearranging,
(1 + k)
5
= 1/0.497 = 2.012
5 ln (1 + k) = ln (2.012) = 0.699
(1 + k)= exp(0.699/5) = exp(0.1398) = 1.15
so the discount factor k is 0.15, or 15%.
6-4. Possible reasons for requiring a high discount rate include the following:
All the proposals that the firm considers are high risk, which is not
reflected in the projected cash flows.
Capital is not available at a fixed rate and a large increase in rates is
expected.
The firm has an alternative investment opportunity for all available
capital that yields 20%. This was the rule for many years at a major oil
company that considered exploratory drilling to be an infinite capital
sink with 20% ROI.
6-5. Net present value and internal rate of return would be affected by the
change to immediate earnings. Payback and ROI, using the definitions
given in this Unit, would not be affected, since their time scales begin when
operations start. Caution All the profitability measures discussed in this
unit are defined differently by some authorities. There are many versions of
ROI. It is wise to include an explicit definition of profitability measures in
any project evaluation.
6-6. Project A and project B are independent and can be considered separately.
Net present value of project A at a 15% discount rate is $1353; net present
value of project B is $2106. Both projects should be approved.
6-7. Project A and project B are no longer independent. The mutually exclusive
alternatives are now project A, project B, or projects A and B. With the
added cost of $5000 for another UPS, execution of both projects is not
attractive. Net present value of the combined projects is -$1540 if the new
UPS is an initial expenditure, or -$888 if it is bought in the first year. Only
project B, which has the larger NPV, should be approved.
6-8. Capital rationing can make projects mutually exclusive if only enough
capital is available to fund one among multiple competing proposals. For
instance, assume there are two qualifying projects, A and B. If project A
will require $700,000 and project B will require $800,000, the projects will
be mutually exclusive if the capital limit is between $800,000 and
$1,500,000.
6-9. If the capital limit is less than $700,000, neither project will be funded. If it
is between $700,000 and $800,000, project A will be funded. If it is greater
than $1,500,000, both projects will be funded.
6-10. The cash flows for this exercise are $1000, -$5000, $2000, $2000, and
$2000. There are two changes of sign, so multiple internal rates of return
are possible. Net present value is positive over the discount rate range of 0
to 28.3% and also when the discount rate is greater than 342%.
Unit 7
7-1. The internal rate of return would be much lower for a 300 ton/day plant.
Costs would be virtually unchanged, while benefits would decrease in
proportion to throughput. Process control project costs, except for wiring,
are usually unaffected by plant size. Controlling a 50 ml/hr pilot plant can
cost as much as controlling a 5,000 ton/day unit.
7-2. Among possible scenarios that could ruin this project are the following:
The plant burns down, blows up, is leveled by a hurricane, etc. No
project is immune to natural disasters.
An agricultural depression reduces the price of ammonia below pro-
duction cost, and the plant is shut down. Few projects are immune to
economic disasters. Note that a general depression, which would
reduce ammonia and natural gas prices, would have less effect.
A new process is invented that reduces costs by 25%, making the
plant uneconomic. The risk of technological obsolescence is always
present. In this case, the risk is fairly remote. A new process would
have to be installed very rapidly, replacing about 50% of ammonia
capacity in 4 years, to force a plant shutdown quickly enough to hurt
this project.
7-3. Production could be increased by 1000/(1 0.0102) 1000 = 10.3 tons/day
while holding natural gas consumption constant. This increase would
bring in $120 10.3 = $1236/day, while costs would increase by only $10
10.3 = $103/day. Annual benefits would be ($1236 $103) 350 =
$397,000/year.
Unit 8
8-1 There are two likely scenarios. Cash flows are as follows:
Since the replacement sensor is so compatible with the original, no
additional installation cost is anticipated. The replacement sensors must
still be calibrated.
8-2. Expected cost is simply the weighted sum of the two scenarios.
The equivalent contingency factor can be calculated from Eq. (8-4).
F = (1 0.8) (360,000/155,000 1) = 0.264
Year Scenario 1 (p= 0.8) Scenario 2 (p= 0.2)
0 -$100,000 -$100,000
1 -55,000 -55,000
2 -205,000
Year Expected Cost
0 -100,000
1 -55,000
2 -41,000
8-3. Again, there are two likely scenarios. Cash flows are as follows:
Expected cost is reduced by trying out the new sensor on only two lines.
This must be balanced against the possible loss of benefits on the other 8
lines during the first year.
8-4. The guarantee eliminates monetary risk but does not eliminate time risk. If
the integrator fails in the middle of the project, there will be a considerable
delay while new personnel figure out what has been done. It is often faster
to scrap everything and redo application software from scratch.
8-5. One major question is software portability: Minor changes often escalate
and become major expenditures. This question can be resolved by testing
plant A's software on the new computer. Another question is system
loading. A faster computer will not necessarily run blends faster if the
limiting factor is outside the computer.
8-6. Probability of the PLC Problem scenario will change to 0.3 (1 0.7) =
0.09. Probability of the Both Problems scenario will change to 0.3 0.7
= 0.21. Probabilities of the other two scenarios will be unchanged.
8-7. If replacement PLCs will certainly cause interface problems, only three
scenarios need be considered. The PLC Problem scenario will be
eliminated, and the probability of the Both Problems scenario will rise to
0.30.
Unit 9
9-1. Expected benefit cash f1ow for year 2 is 0.6 $300,000 + 0.4 $150,000 =
$240,000. Expected cash f1ow in each subsequent year is $300,000.
9-2. Expected benefit cash f1ow for year 2 would be 0.6 $300,000 + 0.4
(1 0.2) $150,000 = $228,000.
Expected benefit cash flow in subsequent years would be unchanged.
9-3. The expected yearly benefit cash flow in this case would be $43,750
(5000 kg/year $8.75/kg average price).
Only one benefit scenario would have to be considered.
Scenario 1 Scenario 2
Year (p= 0.8) (p= 0.2) Expected Cost
0 -$20,000 -$20,000 -$20,000
1 -11,000 -11,000 -11,000
2 -124,000 -205,000 -140,200
9-4. Five scenarios have to be considered. There may be no competition, or
competition may start in the second, third, fourth, or fifth year of the
project.
9-5. The tree is shown below. The five scenarios are labeled NC (no
competition), C2 (competition in 2nd year), C3, C4, and C5.
9-6. Probabilities can be evaluated from the probability tree shown in the
solution to Exercise 9-5 by multiplying the probabilities of the paths of each
scenario. The probability of scenario NC is 0.84 = 0.4096. Probability of C2
is 0.2. Probabilities of C3, C4, and C5 are 0.16, 0.128, and 0.1024,
respectively.
9-7. The expected yearly benefit cash flow without competition is 800,000 kg/
year $1.50/kg 1,000,000 kg/year $1.00/kg = $200,000/year. With
competition the yearly benefit is 800,000 kg/year $1.25/kg - 1,000,000 kg/
year $1.00/kg = 0. Quality improvements are often profitable only until
the competition catches up. In year one, the expected cash flow for all
scenarios is $200,000. The cash flow drops to zero for scenario C2 in year 2,
so expected cash flow is 0.8 $200,000 + 0.2 0 = $160,000. Each year one
additional scenario has zero cash flow. Expected benefits are calculated by
summing scenario cash flows weighted by probabilities.
9-8. Applying Eq. (9-2) for increasing values of n, the expected benefit for the
8
th
year is the first one less than half the initial benefit, or $250K.
Unit 10
10-1. Each competitor may enter the market immediately, after two years, after
four years, or never. There are two events, each with 4 possible states, so
there are 4
2
= 16 possible scenarios.
10-2. The price premium will remain at $0.50 only if there is no competition.
Only four of the scenarios result in no competition after 2 years, so the
probability of a $0.50 premium is 4/16 = 0.25.
10-3. The probability of scenario A is 0.6 and that of scenario B is 0.4, so mean
payback period = 3.33 0.6 + 4.17 0.4 = 3.67 years. From Eq. (10-3),
standard deviation =
= 0.41 years.
10-4. The economic climate of each of the five years in which earnings are realized
must be considered as a separate event. Project cost is also an event, so
there are six binary events and 2
6
= 64 possible scenarios.
10-5. The assumption that the economic climate varies year by year will not affect
the expected cash flow. For any given year, 70% of the scenarios will still
show benefits of $200,000, and 30% will still show benefits of $120,000.
10-6. The assumption that the economic climate varies year by year will decrease
profitability dispersion. The probabilities of the two extremes, a strong
economy for 5 years and recession for 5 years, are reduced from 0.7 and 0.3
Year Expected Benefit Cash Flow
1 $200,000
2 160,000
3 128,000
4 102,000
5 81,920
3.33 3.67 ( )
2
0.6 4.17 3.67 ( )
2
0.4 + [ ]
to 0.168 and 0.003. All the added possibilities lie closer to the mean, so
profitability dispersion is decreased.
10-7. Scenarios BR and WR have IRRs of less than 25%. Each scenario has a
probability of 0.15, so the overall probability of IRR < 25% is 0.3. An IRR
of 25% is slightly less than one standard deviation (12.3) below the mean
(37.1%). If IRR were normally distributed, the probability that IRR < 25%
would be about 0.16, considerably smaller than 0.3.
Unit 11
11-1. The proposed heat balance control scheme violates the keep it simple
strategy recommended in Section 11-2. A simple feedback temperature
controller is sufficient for this process, given the comparatively small
anticipated changes in load. The proposed scheme requires three extra
measurements and one additional controller for little or no additional
benefit.
11-2. This plant is well suited for testing an untried system. The high-speed
weighing system can be tested and debugged on one packaging line, then
replicated to cover the other nine lines.
11-3. Two bubblers would not be appropriate in this situation, since it would be
difficult to tell which one is right. Three sensors might be used. The level
would be calculated as the mean of the two readings that agreed most
closely.
11-4. Four scenarios must be considered. They are as follows:
Test and install
Test and abandon
Install without test and succeed
Install without test and fail
11-5. Expected cash flows are as follows:
Testing is clearly better. Payback time is 3.3 years with C testing and 6.7
years with immediate installation.
Expected Cash Flow, $
Year Test No Test
1 -20,000 -100,000
2 -30,000 15,000
3 15,000 15,000
: : :
n 15,000 15,000
11-6. With an 80% chance of success, testing is no longer justified. Cash flows
are as follows:
Unit 12
12-1.
(a) If there is a higher probability that the sensor will be satisfactory, the
advantages of sensor testing would be decreased. At the extreme, if
there were a 100% probability, sensor testing would be a complete
waste of time and money.
(b) A larger profit per ton of reprocessed spent acid would decrease the
advantages of sensor testing, since the one-year delay in realizing
benefits from a successful project would be more expensive.
(c) A more expensive control system would increase the advantages of
sensor testing. If testing were not done, more money would have to be
committed with a high risk of failure.
12-2. There are six additional possible outcomes after a decision not to test a
sensor, as shown in the decision tree.
12-3. If project implementation is started without testing, the probability that a
working control system will be completed is 0.4. Corporate help will not
affect this probability, which is dependent only upon working sensors.
Unit 13
13-1. Babies and electricity are obviously extreme cases at opposite ends of the
batch continuous spectrum. Perfume, a high value, low volume product
subject to many recipe variations, is more suitable for batch production
than gasoline, a high volume commodity.
13-2. The present chiller can serve all three reactors if a scheduling algorithm is
added to ensure that no more than two vessels are in the reaction phase at
any time.This should not limit production so long as more than one third of
Expected Cash Flow, $
Year Test No Test
1 -20,000 -100,000
2 -80,000 40,000
3 40,000 40,000
: : :
n 40,000 40,000
the cycle does not require cooling. Scheduling to make best use of a common
resource is an important facet of batch control.
13-3. Yearly savings are 5 x 10
6
kg x (0.2 0.1) x $1.50/kg = $750,000.
13-4. Production will not be increased by the control improvement, unless
product is lost in the extraction process.
13-5. Surprisingly, average WIP inventory will remain at 50 tons. Half as much
material as before passes through the extractor but it takes twice as long to
build up a 100 ton batch, so on the average, the contaminated product sits
in inventory twice as long.
13-6. This restaurant practice is a good example of preparing a large ingredient
mix that can later be divided among individual batches (i.e., servings).
Restaurant kitchens have a long history of batch preparation, and many of
the techniques they employ could be profitably transplanted to industrial
environments.
Unit 14
14-1. A case can be made for each of the choices.
a) Automation, because a humanoid robot is being replaced.
b) Control, because feedback from a sensor is used to modify the action
sequence.
c) Machine replacement.
14-2. Yes, it would still be a good investment, assuming no additional costs
attributable to jamming. Production would increase from 10,000 parts/day
to 11,000 x (1 0.05) = 10,450 parts/day. Salable product would increase
to 10,450 x (1 0.1) = 9405 parts/day. Cash flow would change by (9405 -
9000)parts/day x $2/part 450 parts/day x ($0.60 + $0.20) = $450/day.
14-3. Repeated jamming might increase wear on the molding machine, and
reduce its useful life. Additional maintenance labor might be required to
clear the jams. Additional inventory might have to be kept on hand to avoid
stop-and-start production in other areas.
14-4. Annual revenues would be 22,000 x $100 = $2,200,000. Annual costs
would be $250,000 for labor and 22,000 x $50 = 1,100,000 other.
14-5. No, layup robots would not be a good idea. Yearly cash flows for adding
layup robots can be calculated by subtracting the hand layup cash flows
shown in Fig. 14-1 from those shown in Exercise 14-4. NPV at a 20%
discount rate is $46,700. Yearly cash flows for mechanization can be
calculated from Fig. 14-1. NPV at a 20% discount rate is $247,700, over
$200,000 greater than robot NPV.
2.5
2.0
1.5
1.0
0.5
0
-0.5
-1.0
-1.5
0 1 2 3 4 5
Year
Robot layup cash flows
CF, M$

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