Engineering economic analysis of a plastics compounding facility

Abstract

In this project, we assumed that the pilot plant operation of the Research & Development Department of Ferro Corporation, Filled and Reinforced Plastics (F & RP) Division, is considering investing in an additional compounding line. There are two possible alternatives: a continuous mixer (e.g. a Farrell CP-23 Continuous Processor), or a twin-screw extruder (e.g. a ZSK-40 Twin-Screw Extruder). Two major techniques of economic analysis were used to evaluate the two alternatives. All other factors, i.e. the features of each alternative and human factors which affect the output of the equipment, were also evaluated quantitatively. For the present study, a target rate of return at 25% was selected. The results of present worth analysis predicted that the CP- 23 Continuous Processor Compounding Line will be the best choice, generating $57,336 net profit after 10 years of operation at a 25% rate of return. The ZSK-40 Twin-Screw Extruder Compounding Line will generate $3,013 by the same calculation. The rate of return analysis found that the CP-23 Continuous Processor Compounding Line can yield a 31% rate of return per annum which is much higher than the target, while that of the ZSK-40 Twin-Screw Extruder Compounding Line is only 25. 2%. A sensitivity analysis found that the gross margin rate of the ZSK-40 Twin-Screw Extruder Compounding Line would have to pe increased by $0.062/lb. to compete with the CP-23 Continuous Processor Compounding Line. Reducing the undesired down time on the ZSK-40 Twin-Screw Extruder Compounding Line cannot totally solve the problem. It is very important to note that the evaluation of these machines in this study was for a pilot plant facility only. The results have no bearing on a manufacturing operation in the real world.