A novel process has been developed which produces the target product A more

effectively and also generates a valuable by$-$product. The management has decided thus,

to overhaul the existing manufacturing facility to produce $100,000$ tonnes$/$year of the

primary product A$,$ while also generate $500$ tonnes$/$year of by$-$product B$.$ Product A will

sell at $50/$tonne$,$ while product B will sell at $350/$tonne$.$ Financial estimate shows that

the initial investment required would be $20,000,000($spread over initial year of the

project$).$ The plant will achieve full production in year one and the expected project life is

$15$ years. Fixed annual operating costs are expected to be $2\%$ of the initial investment,

and variable operating costs $($excluding raw materials$)$ expected to be $10/$tonne of

product A$.$ The raw material costs are $5/$tonne of product A$.$ Considering the project to

be novel, a higher than usual discount factor of $15\%$ is applied.

Using both discounted and undiscounted cash flow analysis, establish the following:

A$.$ Is the project financially viable? $[15$ marks$]$

B$.$ If the project is not viable, what would be the minimum selling price of product A

to achieve financial viability? $[10$ marks$]$

C$.$ What would be the selling price of A to achieve an internal rate of return of $20\%?$

D$.$ Discuss the importance of energy recovery and heat integration in optimising a

modelled process