Chapter 10 Profitability Analysis

In this chapter, we will see how to apply the techniques of economic analysis developed in Chapter 9. These techniques will be used to assess the profitability of projects involving both capital expenditures and yearly operating costs. We look at a variety of projects ranging from large multimillion-dollar ventures to much smaller process improvement projects. Several criteria for profitability will be discussed and applied to the evaluation of process and equipment alternatives. We start with the profitability criteria for new large projects.

10.1 A Typical Cash Flow Diagram for a New Project

A typical cumulative, after-tax cash flow diagram (CFD) for a new project is illustrated in Figure

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