Early-stage capital cost estimates are critical to determining the financial feasibility of a project.
Thoughtful decisions about capital investment expenditures (CAPEX) can ensure the success of operations and the ability to reliably supply products to customers. In industries such as renewable energy production, petroleum refining, semiconductor manufacturing, and consumer product manufacturing, early-stage cost estimation enables selection of profitable investment opportunities. These estimates also present the best opportunity to decrease the environmental impacts of operations or technologies by identifying environmental or regulatory constraints while maximizing profit. Agile conceptual cost-estimating techniques guide informed and timely decisions to maximize the return on invested capital (ROIC).
This article is Part I of a two-part series on capital cost estimation. Part I defines the five types of capital cost estimates, but focuses on early-stage cost estimating methods such as ratio estimates, industry-specific correlations, and unit cost estimates. Part II, to be published in July 2021, will address detailed capital cost estimation.
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