Capacity Expansion Economics

Engineering Basis

• Net annual cash flow = revenue − OPEX (level annuity).
• NPV = −CAPEX + Σ CF/(1+r)^t + salvage/(1+r)^N.
• IRR solves NPV = 0; PI = (NPV+CAPEX)/CAPEX; payback = CAPEX/CF.
• Run per alternative and compare NPV/IRR; standards: AACE economic evaluation, DCF.