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Capital Costs Quickly Calculated

By Gael D. Ulrich and Palligarnai T. Vasudevan,
University of New Hampshire |

A chemical executive once noted that his firm derives one-third of its income from products that are less than ten years old. Indeed, existing companies thrive and new ones proliferate through innovation and product improvement. They depend on scientists and engineers working "in the trenches" or "at the bench" to drive development. Yet, most potential innovations never succeed. Engineers who can separate lucrative concepts from duds early on are worth their weight in gold. Mastery of the information in this article can help you become one of those engineers. It’s important to define promising projects quickly so that money is not wasted on dead ends. Economic evaluation should begin at conception and continue in parallel with research and pilot studies before design and development expenses begin to balloon. Costs of prolonging a project and securing more detail increase exponentially with time. Clearly, if the project is a "loser," the sooner it is abandoned, the better. Any engineer with practical experience can cite projects that were supported far beyond the point of viability. One can construct the economic profile for a manufacturing process from a few basic data, such as raw material prices,…
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