Group F - Lab 2 - Abe17

Republic of the Philippines
UNIVERSITY OF RIZAL SYSTEM

COLLEGE OF AGRICULTURE
Tanay, Rizal
Email Address: coa.ursmain@gmail.com
Tel No. 401-4911
Office of the College of Agriculture
MACHINE DESIGN FOR AB PRODUCTION (AB 17)
Laboratory Exercise 2
Economic Analysis of the

Combined Grinder-Pelletizer Machine
Prepared and Submitted by:
MERYLL JOY DAVID

AUHRENE MAE V. ENABORRE
JOHN MARK B. STO. DOMINGO
BSABE - III
(Group F)
Submitted to:
ENGR. ELMAN C. TORRES

Instructor I
DATE SUBMITTED
October 9, 2023
Tanay, Rizal
Tel No. 401-4911
I. INTRODUCTION
This economic analysis aimed to determine the financial projection of the

proposed combined grinder and feed pelleting machine with regards to its
estimated working life and the services it offers including machine rental,
pelletizing services, and livestock feed production.
This analysis also includes the estimation of the total costs/expenses in this
proposal which involves the investment, operation, and livestock production cost
concurring with the utilization of the designed pellet mill. The calculation also
includes the benefits and returns that are projected to be acquired within service
life of the machine. Specifically, the investment cost, total fixed and variable costs,
returns on investment of constructing machine and other operational costs for this
combine grinder and feed pellet mill proposal are determined and presented.
Moreover, this paper also presents the utilization of different methods of

economic analysis in relation to the abovementioned machine, including the
payback period, breakeven point, net present value, benefit-cost ratio, internal rate
of return, and sensitivity analysis in utilizing the Combined Grinder-Pelletizer
Machine.
II. OBJECTIVES
To classify the cost associated with the agricultural machinery, Combined

Grinder-Pelletizer, and to analyze the cost of machine using methods of project
appraisal.
III. MATERIALS AND EQUIPMENT
The materials and equipment used in this activity includes:

• Computer/Laptops
• Learning Resources online
IV. PRESENTATION OF DATA COLLECTED
This section presents the data and assumptions made by the group to
analyze the economic performance of the Combined Grinder-Pelletizer Machine
using the abovementioned methods.
Table 1 shows the inputs for the cost-return analysis of the Combined
Grinder-Pelletizer, including the basis for investment costs, fixed cost rates,
variable costs, and profit aspect of the said machine.
2|Page AB 17 – Machine Design for AB Production (Laboratory)
Tanay, Rizal
Tel No. 401-4911
Table 1. Inputs for the Cost and Return Analysis of the Combined Grinder-
Pelletizer Machine
Inputs S.A. Price Source
Investment Cost Inputs
Total Machine Cost 1.00 15950.00
Fixed Cost Inputs
Salvage Value at 10% 1597.00 Agricultural
Interest on Investment Rate, % 0.0625 Engineering
Repair and Maintenance Rate, % 0.10 Formulas,
Belonio
Tax and Insurance Rate, % 0.12
Discount Factor, % 0.12 NEDA, 2017
Lifespan, y 6 Engine Specs
Variable Cost Inputs
Pelleting Capacity, kg/h 41.00 Abogo-Habaga,
Electric Consumption, kWh 1.10 2017
Electricity Rate, Php/kWh 11.43 Meralco, 2023
Hourly Operation (HO) per day, h/day 6 Personal
Annual Utilization (AU), day/y 52 Preference
Annual Service Days (ASD), day/y 100
Annual Rental Days (ARD), day/y 100
Lubricant Cost Rate, % 0.015 Belonio
Wage per Worker, Php/day 438.00 Lecture
Number of Worker (n) 1 Personal Pref.
Price of Sack, Php/bag 12.00 Online
Bag Capacity, kg 50.00 Product Descr.
Raw Poultry Pellet Materials, Php/kg 20.38 Appendix C
Raw Pig Pellet Materials, Php/kg 18.35 Appendix B
Returns Inputs
Profit Margin 0.20 Jain, 2023
Pelleting Charge, Php/h 93.33
Daily Rental Interest, % 0.4 Hapn
Rental Charge, Php/day 560.00
Days of Poultry Pellet Production, day/y 26 Personal Pref.
Annual Production of Poultry Feeds, 6396.00
kg/y
Poultry Feed Selling Price, Php/kg 26.79

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Tel No. 401-4911
Days of Pig Pellet Production, day/y 26 Personal Pref.

Annual Production of Pig Pellets, kg/y 6396.00
Pig Pellet Selling Price, Php/kg 24.35
S.A. - Sensitivity Analysis Percentage, decimal. All % are in decimal form already.
Using the data presented in Table 1, the different parts in a cost and return
and analysis were computed as follows:
Fixed Cost
A. Depreciation (D) @ 6 Years Life Span
Investment Cost − Salavage Value

D=
Useful Life
15,970.00 Php − [15,970.00 Php (10%)]

D=
6 years
𝐃 = 𝟐, 𝟑𝟗𝟓. 𝟓𝟎 𝐏𝐡𝐩
B. Interest on Investment (IOI)
Investment Cost + Salavage Value

IOI = (Interest Rate, r)
2
15,970.00 Php + [15,970.00 Php (10%)]

IOI = (6.25%)
2
𝐈𝐎𝐈 = 𝟓𝟒𝟖. 𝟗𝟕 𝐏𝐡𝐩
C. Repair and Maintenance (R&M, 10%)
R&M = Repair and Maintenance Rate ∗ Investment Cost
R&M = 10% ∗ PhP 15,970.00
𝐑&𝐌 = 𝟏, 𝟓𝟗𝟕. 𝟎𝟎 𝐏𝐡𝐏
D. Tax and Insurance (12%)
T&I = Insurance Rate ∗ Investment Cost

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Tel No. 401-4911
T&I = 12% ∗ 15,970.00 Php
𝐓&𝐈 = 𝟏, 𝟗𝟏𝟔. 𝟒𝟎 𝐏𝐡𝐩
Total Fixed Cost (TFC)
TFC = D + IOI + R&M + T&I
TFC = 2,395.50 Php + 548.97 Php + 1,597.00 Php + 1,916.40 Php
𝐓𝐅𝐂 = 𝟔, 𝟒𝟓𝟕. 𝟖𝟕 𝐏𝐡𝐩
Variable Cost (Php/kg)
A. Electricity Cost (EC)
rate electric consumption 1

EC = ∗ ∗ Pelleting Capacity
kWh hr
11.43 Php 1.10 kWh 1 hr

EC = ∗ ∗
kWh hr 41 kg
𝐄𝐂 = 𝟎. 𝟑𝟏 𝐏𝐡𝐩/𝐤𝐠
B. Lubricant Cost (LuC)
LuC = (1.5%) ∗ (EC)
LuC = 0.015 ∗ 0.31 Php/kg
𝐋𝐮𝐂 = 𝟎. 𝟎𝟎𝟓 𝐏𝐡𝐩/𝐤𝐠
C. Packaging Cost (PC)
Sacks or Bags:
cost 1
PC = ∗
unit bag capacity
12 Php 1 bag
PC = ∗ 50 kg
bag
𝐏𝐂 = 𝟎. 𝟐𝟒 𝐏𝐡𝐩/𝐤𝐠

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D. Labor Cost (LC)
wage 1 1
LC = n ∗ ( day ) ∗ HO ∗ Pelleting Capacity
438 Php 1 day 1 hr

LC = 1 ∗ ∗ 6 hrs ∗ 41 kg
day
𝐋𝐂 = 𝟏. 𝟕𝟖 𝐏𝐡𝐩/𝐤𝐠
E. Raw Pig Pellet Material (PiM)

𝐵𝑃𝑃𝑇+𝐴𝑃𝐹𝑇+𝑀𝑃𝐹𝑇
PiM = - Appendix B
3
(16.474+15.57+23)𝑃ℎ𝑝/𝑘𝑔
PiM = day
𝐏𝐢𝐌 = 𝟏𝟖. 𝟑𝟓 𝐏𝐡𝐩/𝐤𝐠
F. Raw Poultry Pellet Material (PiM) = 20.38 Php/kg - Appendix
Variable Cost (Php/y)
A. Electricity Cost (EC)
rate electric consumption hourly operation

EC = ∗ ∗ ∗ annual utilization
kWh hr day
11.43 Php 1.10 kWh 6 hrs 52 days

EC = ∗ ∗ ∗
kWh hr day y
𝐄𝐂 = 𝟑, 𝟗𝟐𝟐. 𝟕𝟖 𝐏𝐡𝐩/𝐲
B. Lubricant Cost (LuC)
LuC = (1.5%) ∗ (EC)

LuC = 0.015 ∗ 3,922.78 Php/y
𝐋𝐮𝐂 = 𝟓𝟖. 𝟖𝟒 𝐏𝐡𝐩/𝐲
C. Packaging Cost (PC)
Sacks or Bags:

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Tel No. 401-4911
cost bag
PC = ∗ capacity ∗ Pelleting Capacity ∗ HO ∗ AU )
bag
12 Php 1 bag 41 kg 6 hrs 52 days

PC = ∗ 50 kg ∗ ∗ ∗
bag hr day y
𝐏𝐂 = 𝟑, 𝟎𝟕𝟎. 𝟎𝟖 𝐏𝐡𝐩/𝐲𝐫
D. Labor Cost (LC)
wage
LC = n ∗ ( day ) ∗ AU
438 Php 52 days

LC = 1 ∗ ∗
day year
𝐋𝐂 = 𝟐𝟐, 𝟕𝟕𝟔. 𝟎𝟎 𝐏𝐡𝐩/𝐲𝐫
E. Pig Pellet Production Cost (PiC)
PiC = 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑖𝑔 𝑝𝑒𝑙𝑙𝑒𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑥 𝑃𝑖𝑀 - Appendix B

𝑘𝑔 𝑃ℎ𝑝
PiC = 6396 𝑥 18.35
𝑦 𝑘𝑔
𝐏𝐢𝐂 = 𝟏𝟏𝟕𝟑𝟓𝟑. 𝟖𝟏 𝑷𝒉𝒑/𝒚
F. Poultry Pellet Production Cost (PiC)
PiC = 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑖𝑔 𝑝𝑒𝑙𝑙𝑒𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑥 𝑃𝑖𝑀 - Appendix C

PiC = 6396 𝑥 20.38
𝑦 𝑘𝑔
𝐏𝐢𝐂 = 𝟏𝟑𝟎, 𝟑𝟓𝟎. 𝟒𝟖 𝑷𝒉𝒑/𝒚
Returns (Php/kg)
Initial Variable Cost, (IVC):

IVC = 𝐸𝐶 + 𝐿𝐶 + 𝑃𝐶 + 𝐿𝐶
IVC = 0.31 + 0.005 + 0.24 + 1.78
Php
IVC = 2.335 kg
Rental Charge (RC) = Daily Rental Rate x IC = 0.04 x 15970 = 638.80 Php/day
Pelleting Charge = RC/HO = 638.80 Php/day / (1/8 h/day) = 104.47 Php/p

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A. Pelleting Service Income

1
PS = 𝑃𝑒𝑙𝑙𝑒𝑡𝑖𝑛𝑔 𝐶ℎ𝑎𝑟𝑔𝑒 𝑥 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
𝑃ℎ𝑝 1 ℎ𝑜𝑢𝑟
PS =106.47 𝑥
ℎ 41 𝑘𝑔
𝑃ℎ𝑝
PS = 2.60 𝑘𝑔
B. Machine Rental Income

1 1
MR = 𝑅𝑒𝑛𝑡𝑎𝑙 𝐶ℎ𝑎𝑟𝑔𝑒 𝑥 𝐻𝑂 𝑥 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
𝑃ℎ𝑝 1 𝑑𝑎𝑦 1 ℎ𝑜𝑢𝑟

MR =638.80𝑑𝑎𝑦 𝑥 6 ℎ𝑜𝑢𝑟 𝑥 41 𝑘𝑔
𝑃ℎ𝑝
MR = 2.60 𝑘𝑔
C. Poultry Pellet Sales (PoS)
PoS = 𝑅𝑎𝑤 𝑃𝑜𝑢𝑙𝑡𝑟𝑦 𝑃𝑒𝑙𝑙𝑒𝑡 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 (1 + 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛) + 𝐼𝑉𝐶

𝑃ℎ𝑝 𝑃ℎ𝑝
PoS = 20.38 (1 + 0.2) + 2.335
𝑘𝑔 𝑘𝑔
𝑷𝒉𝒑
PoS = 𝟐𝟔. 𝟕𝟗 𝒌𝒈
D. Pig Pellet Sales (PiS)
PiS = 𝑅𝑎𝑤 𝑃𝑖𝑔 𝑃𝑒𝑙𝑙𝑒𝑡 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 (1 + 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛) + 𝐼𝑉𝐶

𝑃ℎ𝑝 𝑃ℎ𝑝
PiS = 18.35 (1 + 0.2) + 2.335
𝑘𝑔 𝑘𝑔
𝑷𝒉𝒑
PiS = 𝟐𝟒. 𝟑𝟔 𝒌𝒈
Returns (Php/y)
A. Pelleting Service Income

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PS = 𝑃𝑒𝑙𝑙𝑒𝑡𝑖𝑛𝑔 𝐶ℎ𝑎𝑟𝑔𝑒 𝑥 𝐻𝑂 𝑥 𝐴𝑈
𝑃ℎ𝑝 6 ℎ𝑟 26 𝑑𝑎𝑦
PS =106.47 𝑥 𝑥
ℎ 𝑑𝑎𝑦 𝑦
𝑃ℎ𝑝
PS = 63880 𝑦
B. Machine Rental Income

𝑃ℎ𝑝 100 𝑑𝑎𝑦𝑠
MR = 𝑅𝑒𝑛𝑡𝑎𝑙 𝐶ℎ𝑎𝑟𝑔𝑒 𝑥 𝐴𝑅𝐷 = 638.80 𝑑𝑎𝑦 𝑥 𝑦
𝑃ℎ𝑝
MR = 63880 𝑦
C. Annual Poultry Pellet Sales (APoS)
APoS = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑜𝑓 𝑃𝑜𝑢𝑙𝑡𝑟𝑦 𝐹𝑒𝑒𝑑𝑠 𝑥 𝑃𝑜𝑆

APoS = 6396 𝑥 26.79
𝑦 𝑘𝑔
𝑷𝒉𝒑
APoS = 𝟏𝟕𝟏, 𝟑𝟑𝟒. 𝟒𝟐 𝒚
D. Annual Pig Pellet Sales (APiS)
APiS = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑜𝑓 𝑃𝑖𝑔𝐹𝑒𝑒𝑑𝑠 𝑥 𝑃𝑖𝑆

APiS = 6396 𝑥 24.36
𝑦 𝑘𝑔
𝑷𝒉𝒑
APiS = 𝟏𝟓𝟓, 𝟕𝟑𝟖. 𝟒𝟐 𝒚
Table 2 presents the summary of the computed variables relevant to the
cost and return analysis of the Combined Grinder-Pelletizer Machine.
Table 2. Cost and Return Analysis of the Combined Grinder-Pelletizer

Machine
Variables Prices
Investment Cost 15970.00

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Tel No. 401-4911
Fixed Cost
Depreciation, Php/y 2395.50
Interest on Investment, Php/y 548.97
Repair and Maintenance, Php/y 1597.00
Tax and Insurance, Php/y 1916.40
Total Fixed Cost 6457.87
Variable Cost Php/kg Php/y

Electric Cost, Php/y 0.31 3922.78
Lubricant Cost, Php/y 0.005 58.84
Packaging Cost, Php/y 0.24 3070.08
Labor Cost, Php/y 1.78 22776.00
Raw Poultry Pellet Materials, Php/kg 20.38 130350.48
Raw Pig Pellet Materials, Php/kg 18.35 117353.81
Total Variable Cost 41.06 277531.99
Total Cost 41.06 299959.85
Returns Php/kg Php/y

Pelleting Services 2.60 63880.00
Machine Rental 2.60 63880.00
Poultry Feed Pellet Sales 26.79 171334.42
Pig Feed Pellet Sales 24.35 155738.42
Gross Benefits 56.33 454832.84
Net Benefit, 1st Year 15.27 154872.99

Net Benefit, Following Years 15.27 170842.99
It can be viewed from the table above that the total or gross benefits that
can be acquired from utilizing the Combined Grinder-Pelletizer machine is higher
than the total cost it needs for an annual operation. This implies that the said
machine is profitable if the benefits are acquired through pelleting and rental
services, and marketing of customized pellet feeds.
Table 3 shows the annual costs and benefits of the Combined Grinder-
Pelletizer Machine during its working years (6 years) and its relation to the payback
10 | P a g e AB 17 – Machine Design for AB Production (Laboratory)

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period needed to receive the investment cost spent for the construction of the said
machine.
Table 3. Payback Period of the Combined Grinder-Pelletizer Machine
Payback Period (PBP)
Initial Investment 15,970 Php

PBP = = = 𝟎. 𝟎𝟗𝟑
Average annual net benefits 170,842.99 Php
The table above shows that the lowest net benefit that can be received is
during the first year of operation of the Combined Grinder-Pelletizer in which there
is a higher total cost of operation due to the initial investment of the machine.
Moreover, a salvage value can also be received once the useful life of the machine
ends. With these, the machined offers a 0.093 payback period in terms of years.
This means that in about 1.1 month or 34 days, the machine is expected to
get a return of 15,970 Php, which is equal to the investment cost of the machine.
On the other hand, Table 4 presents the breakeven point in utilizing the
Combined Grinder-Pelletizer Machine.
Table 4. Breakeven Point of of the Combined Grinder-

Pelletizer Machine
Item Value
Fixed Cost, Php/y 6457.87
Variable Cost, Php/kg 41.06
Benefits, Php/kg 56.33
BEP, kg/y 422.89

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BREAKEVEN POINT (BEP)
Fixed Cost, Php/y 6,457.87 Php/y

BEP = = = 𝟒𝟐𝟐. 𝟖𝟗 𝐤𝐠/𝐲
(Benefits − VC), Php/kg (56.33 − 41.06)Php/kg
It could be gleaned from the table above the variables and calculations
necessary to determine the breakeven point of the machine. In this case, the
breakeven point of the Combined Grinder-Pelletizer Machine is 422.89 kg/y. This
indicates that the machine can pay the initial losses of its operation once it
produced 422.89 kg of pellets and service annually. This point also indicates the
starting point in which the machine can make profit without losses.
Table 5 presents the cash flow statement of the Combined Grinder-

Pelletizer for 6 years in relation to the previous data presented above.
Table 5. Cash Flow Statement of the Combined Grinder-Pelletizer Machine
It can be realized from the table above that the cash flow statement is a
simpler version of a cost and return analysis as it is composed on only three parts
such as cash inflow, cash outflow, and net benefit, without list of detailed
particulars. However, the depreciation and interest on investment are not
considered in this analysis as it will be taken cared of discount factor which is often
incorporated in this table.
Table 6 presents the discounted cash flow statement based on the previous
table and discount factor of 12% in the Philippines.
Table 6. Discounted Cash Flow Statement of the Combined Grinder-Pelletizer

Machine
Year No.
Items Total
0 1 2 3 4 5 6
A. Cash Inflow 406100.75 362589.96 323741.03 289054.49 258084.37 230432.47 1870003.08
B. Cash Outflow
IC 15970.00 0.00 0.00 0.00 0.00 0.00 0.00 15970.00
Operating Cost 250933.38 224047.66 200042.55 178609.42 159472.70 142386.34 1155492.06
Total Costs 15970.00 250933.38 224047.66 200042.55 178609.42 159472.70 142386.34 1171462.06
C. Net Benefit -15970.00 155167.37 138542.30 123698.48 110445.07 98611.67 88046.13 698541.03
Discounted Value = Current Value / ( 1 + DF )^(Year #)

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The discounted cash flow statement above presents the present value of
the money that the machine will make in the future. It could be gleaned from the
table that with the discount factor, the present value of the future income is getting
lower as the years progress. This could imply that the purchasing power of the
money that will be acquired in the future tend to decrease every year.
Using the data presented in Table 6, other methods of project appraisal can
be utilized, such as:
NET PRESENT VALUE (NPV)

(Bt −Ct ) (NB )
NPV = ∑nt=1 or ∑nt=1 (1+r)t t
(1+r)t
NPV = 1,870,003.08 Php − 1,171,462.06 Php
𝐍𝐏𝐕 = 𝟔𝟗𝟖, 𝟓𝟒𝟏 𝐏𝐡𝐩
BENEFIT-COST RATIO (BCR)

B C
BCR = ∑nt=1 (1+r)
t
t /
∑nt=1 t t
(1+r)
1,870,003.08 Php
BCR =
1,171,462.06 Php
𝐁𝐂𝐑 = 𝟏.60
As for the internal rate of return of utilizing the Combined Grinder-Pelletizer,

the IRR Function in Microsoft Excel was used for its computation using the net
benefits in Table 6 as the inputs. The results shows that the utilization of the said
machine have an IRR of 9.61 or 961%.
The positive and high net present value (NPV) indicates that the number of
benefits that will be acquired in the future through this operation still have value in
the present time, which makes it also valuable in the future. Then, the benefit-cost
ratio (BCR) computed which is greater than 1 implies that the benefits that the
machine offers is greater than the overall cost it will require. Lastly, the internal
rate of return (IRR) which is evidently higher than the discount factor implies that
the machine has a high investment opportunity as it can generate more that what
will be invested in it.

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Table 7 summarizes the results of different methods of analyzing the

economic aspect of the Combined Grinder-Pelletizer Machine.
Table 7. Economic Analysis of Combined Grinder-Pelletizer Machine

Methods Values
1. Cost and Return Analysis
154872.99
(Net Benefits), Php/y
2. Payback Period, y 0.093
3. Breakeven Point, kg/y 422.89
4. Net Present Value, Php 698541.03
5. Benefit-Cost Ratio 1.60
6. Internal Rate of Return, % 9.61
The low payback period and breakeven point, and high net benefits, benefit-
cost ratio, net present value, and internal rate of return is a positive indication of
the potential of Combined Grinder-Pelletizer in gaining profit in the market as
discussed in previous sections.
However, there are several factors that can influence the economic
performance of the machine – inflation for example. In relation to this, Table 8 and
Figure 1 shows a sensitivity analysis in which these factors are incorporated to the
inputs for the cost and return analysis. Specifically, a margin of 20% was applied
both positively and negatively on the said data.
To determine how well the machine will perform towards these changes,
the margin is only incorporated in the inputs under costs. Thus, the operational
costs of the machine will increase, but the benefits that can be received will remain
the same.
Table 8. Sensitivity Analysis on Combined Grinder-Pelletizer Machine

Change, at 20% rate
Methods
0.80 1.00 1.20
1. Cost and Return Analysis
189331.56 154872.99 120451.61
(Net Benefits), Php/y
2. Payback Period, y 0.063 0.093 0.137
3. Breakeven Point, kg/y 230.155 422.889 956.662
4. Net Present Value, Php 827855.216 698541.026 569379.753
5. Benefit-Cost Ratio 1.883 1.596 1.405

Tanay, Rizal
Tel No. 401-4911
6. Internal Rate of Return, % 14.182 9.609 6.562
SENSITIVITY ANALYSIS OF THE MACHINE

Series1
80% Series2
100% Series3
120%
6. INTERNAL RATE OF RETURN, % 14.182 9.609 6.562
5. BENEFIT-COST RATIO 1.883 1.596 1.405
4. NET PRESENT VALUE, PHP 827855.216 698541.026 569379.753

METHODS
3. BREAKEVEN POINT, KG/Y 230.155 422.889 956.662
2. PAYBACK PERIOD, Y 0.063 0.093 0.137
1. COST AND RETURN ANALYSIS

(NET BENEFITS), PHP/Y
189331.56 154872.99 120451.61
VALUES
Figure 1. Sensitivity Analysis for Combined Grinder-Pelletizer Machine
It can be seen from the figure and table that the highest IRR, BCR, NPV,
and Net Benefits occurred when there is a 20% decrease in the operational costs
of the Combined Grinder-Pelletizer Machine. Hence, lower operational costs are
beneficial for the machine economically.
In contrary, the highest PBP and BPE occurred when the operational costs
are increased by 20%. This increase, especially in terms of BPE, is not ideal for
the machine as it will take a longer time before it can recover from its investment
cost.
Despite of these changes, it can be realized that the economic parameters

remain on the acceptable level, which is greater than 1 in terms of BCR, positive
NPV and net benefits, and greater than the discount factor of 21% in terms of IRR.
Therefore, the utilization of the Combined Grinder-Pelletizer Machine remains
economical even with acceptable at a 20% sensitivity margin.
V. Conclusion

Tanay, Rizal
Tel No. 401-4911
In light of the presented discussion, the low value of payback period and
breakeven point indicates that the Combined Grinder-Pelletizer Machine can
quickly recover the investment cost spent in the beginning. On the other hand, the
high Net Benefits in Cost and Return Analysis and the Benefit Cost-Ratio above 1
shows the potential of the Combined Grinder-Pelletizer machine to generate
benefits and/or income despite the simultaneous investment to operational costs.
Then, the elevated level of Net Present Value and Internal Rate of Return opens
an investment opportunity for the machine as it indicates the machine’s capability
to gain more than what is invested on it.
Lastly, the sensitivity analysis also helped in determining the extent of the
Combined Grinder-Pelletizer Machine’s potential in the economic aspect. In this
analysis, the impact of a simple change in one rate, price, or input to the overall
performance of the product or service can be observed. Through this, necessary
actions can be planned accordingly to either minimize these impacts or use it for
the economic advantage of the machine.
VI. References
Dekes. (n.d.). Feed pellet machine,Pelletizer machine feeds,Pellets feeds

maker machine household wet and dry autom. Retreived, October 8, 2023,
from:
https://shopee.ph/product/712486554/22224387845?gclid=CjwKCAjwg4
SpBhAKEiwAdyLwvLar7DQkLaYzBEq_NLFcnlg-ZX_G_Dmq94on_WtYf-
fEuuh94z3KghoCpaYQAvD_BwE&fbclid=IwAR2vTaM9NfyuCJIP9X9A2B
uZvjDTgvDNLat0OaYO6rxQwJ1azA0whpeKLDs
A.P.International. (n.d.). 3hp Pelletizing Machine, Production Capacity: 150

kg/hr. Retreived, October 8, 2023, from:
https://www.indiamart.com/proddetail/3hp-pelletizing-machine-
25968020591.html?fbclid=IwAR3VEybmeSMxf33yTc_4FvBcWq2n6WZJ
nthHKLCqumnNJXh8lr85Uv2mjqU
Meralco. (n.d.). March 2023 Rates Updates. Retreived, October 8, 2023, from:
https://company.meralco.com.ph/news-and-advisories/march-2023-rates-
updates-
0?fbclid=IwAR0PyUzkdNOzQHGSADWxANsTGX0UE_UVA8F4va0yBW
LEj8GewV3tuviCmAs
National Economic Development Authority (Neda). (2016, September 30).

Revisions on ICC Guidelines and Procedures (Updated Social Discount
Rate for the Philippines). Retreived, October 8, 2023, from:

Tanay, Rizal
Tel No. 401-4911
https://www.neda.gov.ph/wp-content/uploads/2017/01/Revisions-on-ICC-
Guidelines-and-Procedures-Updated-Social-Discount-Rate-for-the-
Philippines.pdf?fbclid=IwAR1MGPZ84F3oE0x7E_vxVYUiW67hyATfqgnL
nJneoTPljHRkl7Oonpv7PnA
Philippines - Corporate - Other taxes. (n.d.).

https://taxsummaries.pwc.com/philippines/corporate/other-
taxes?fbclid=IwAR0KDeFN9qbIdzfl1bnM0dEk8n7Em9gvy3RtCgWvbD10
gbwqfjBJm9rQUpI
Nikkei Asia. (n.d.). Nikkei Asia. https://asia.nikkei.com/Economy/Central-bank-

of-Philippines-keeaps-policy-rate-steady-at-
6.25?fbclid=IwAR1ceqefHuSMjAJOH75Wbcv4uj6X8lQAZVPAsr1QTBEd
UmGfuDus81K610E
To access the Microsoft Excel Sheet with formulas for the economic analysis,
scan the QR Code below.

Tanay, Rizal
Tel No. 401-4911
Appendix A
Bill of Materials for the Combined Grinder-Pelletizer Machine
UNIT TOTAL
COMPONENTS DESCRIPTION QTY
PRICE (PHP)
Power Consumption: 2.2
Electric Motor kWh 1 3,560.00 3,560.00
Life Span: 6 years
Casing of the Aluminum Plate (610mm
1 580.00 580.00
Machine x 1219mm x 3mm)
Mild Steel (25mm x
Angle Bars 25mm x 4mm) 1 460.00 460.00
Length: 6 meters
Mild Steel (1000mm x
Base Plate 1 1,000.00 1,000.00
500mm x 40mm)
Pulley Cast Iron (d = 125mm) 2 532.00 1,064.00
Anti-static, oil and heat
Belt 2 70.00 140.00
resistant
Die plate 3 mm die diameter 1 1,500.00 1,500.00
4 mm die diameter 1 1,500.00 1,500.00
5 mm die diameter 1 1,500.00 1,500.00

160-Type Assemby (3
Pressure Roller 1 3,697.00 3,697.00
pressure wheels)
Aluminum Plate (610mm
Feed Hopper 1 580.00 580.00
x 1219mm x 3mm)
Grating Cylinder Aluminum 1 263.00 263.00
5mm x 25mm Hexagonal
Bolts and Nuts 2 42.00 84.00
Bolt (10 pc./pack)
Ball Bearings 20mm x 47mm x 14mm 1 42.00 42.00
TOTAL MACHINE COST (PhP) 15,970.00

Tanay, Rizal
Tel No. 401-4911
Appendix B
Raw Pig Pellet Materials
Baby Pig Pellets: Weighs 5-10 kg
Feedstuffs Used Cost of Used

Final Cost of
Feedstuffs, Feedstuffs,
Feedstuffs
COF UFS
Php/kg % in decimal =
Php/kg
kg
Fine rice bran 14.74 0.0594 0.88
Fish meal 26.07 0.05 1.3
Soybean meal 20.4 0.204 4.16
Corn 15.3 0.54 8.26
Calcium 56.68 0.032
1.81
hydrophosphate
Salt 29 0.0016 0.05
Limestone 20 0.0007 0.014
Total (BPPT) 16.474
Adult Pelletized Feeds: Weighs 10-20 kg
Cost of Final Cost of

Feedstuffs Used Used Ratio
Feedstuffs Feedstuffs
% in decimal =
Php/kg Php/kg
kg
Fine rice bran 14.74 0.1041 1.53
Fish meal 26.07 0.04 1.04
Soybean meal 20.4 0.001 0.02
Corn 15.3 0.53 8.11
Wheat bran 50 0.06 3
Calcium
56.68 0.031 1.76
hydrophosphate
Salt 29 0.0014 0.04
Limestone 20 0.0035 0.07
Total (APFT) 15.57

Tanay, Rizal
Tel No. 401-4911
Appendix B
Raw Pig Pellet Materials
Mature Pig Pelletized Feeds: Weighs 20-60 kg
Final Cost of
Feedstuffs Used Cost of Feedstuffs Used Ratio
Feedstuffs
Php/kg % in decimal = kg Php/kg

Fine rice bran 14.74 0.1 1.47
Fish meal 26.07 0.02 0.52
Soybean meal 20.4 0.16 3.26
Corn 15.3 0.53 8.11
Wheat bran 50 0.15 7.5
Calcium
56.68 0.0358 2.03
hydrophosphate
Salt 29 0.0019 0.06
Limestone 20 0.0023 0.05
Total (MPFT) 23
Annual Pig Pellet Production = Days of Production x Machine Capacity x HO

= 26 days/y x 41 kg/h x 6 h
= 6396 kg/y

Tanay, Rizal
Tel No. 401-4911
Appendix C
RAW POULTRY PELLET MATERIALS
For Base-Mix:
Feedstuffs Used for Cost of Final Cost of

Base-mix
Base-mix Feedstuffs Feedstuffs
% in decimal =
Php/kg Php/kg
kg
Blood meal 17.5 0.02 0.35
Fishmeal 7 0.16 1.12
Ipi-ipil leaf metal 3 0.08 0.24
Bone meal 2.5 0.04 0.1
Sweet potato top
3 0.12 0.36
meal
Golden snail meal 4 0.08 0.32
Corn bran 12.5 0.12 1.5
Copra meal 15 0.08 1.2
Peanut meal 50 0.04 2
Malunggay leat meal 5 0.08 0.4
Lemon grass meal 4 0.04 0.16
Kakawati leaf meal 3 0.04 0.12
Molasses 10 0.08 0.8
Powder oyster shell 25 0.02 0.5
TOTAL: 1 9.17
Base-mix 9.17 0.04 9.17

Corn bran 12.5 0.1556 1.945
Kangkong meal 3.85 0.4664 1.79564
Rice bran 12 0.1556 1.8672
Cornstarch 25.2 0.2224 5.60448
TOTAL: 1.0 20.38232
Final Cost = Summation (Cost of Feedstuff x Base)
Annual Poultry Pellet Production = Days of Production x Machine Capacity x
Hourly Operation
= 26 days/y x 41 kg/h x 6 h
= 6396 kg/y

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Republic of the Philippines

UNIVERSITY OF RIZAL SYSTEM

MACHINE DESIGN FOR AB PRODUCTION (AB 17)

Economic Analysis of the

Prepared and Submitted by:

MERYLL JOY DAVID

ENGR. ELMAN C. TORRES

This economic analysis aimed to determine the financial projection of the

Moreover, this paper also presents the utilization of different methods of

To classify the cost associated with the agricultural machinery, Combined

III. MATERIALS AND EQUIPMENT

The materials and equipment used in this activity includes:

IV. PRESENTATION OF DATA COLLECTED

3|Page AB 17 – Machine Design for AB Production (Laboratory)

Days of Pig Pellet Production, day/y 26 Personal Pref.

A. Depreciation (D) @ 6 Years Life Span

Investment Cost − Salavage Value

15,970.00 Php − [15,970.00 Php (10%)]

B. Interest on Investment (IOI)

Investment Cost + Salavage Value

15,970.00 Php + [15,970.00 Php (10%)]

𝐈𝐎𝐈 = 𝟓𝟒𝟖. 𝟗𝟕 𝐏𝐡𝐩

C. Repair and Maintenance (R&M, 10%)

R&M = Repair and Maintenance Rate ∗ Investment Cost

R&M = 10% ∗ PhP 15,970.00

𝐑&𝐌 = 𝟏, 𝟓𝟗𝟕. 𝟎𝟎 𝐏𝐡𝐏

D. Tax and Insurance (12%)

T&I = Insurance Rate ∗ Investment Cost

4|Page AB 17 – Machine Design for AB Production (Laboratory)

T&I = 12% ∗ 15,970.00 Php

𝐓&𝐈 = 𝟏, 𝟗𝟏𝟔. 𝟒𝟎 𝐏𝐡𝐩

Total Fixed Cost (TFC)

TFC = D + IOI + R&M + T&I

TFC = 2,395.50 Php + 548.97 Php + 1,597.00 Php + 1,916.40 Php

𝐓𝐅𝐂 = 𝟔, 𝟒𝟓𝟕. 𝟖𝟕 𝐏𝐡𝐩

Variable Cost (Php/kg)

A. Electricity Cost (EC)

rate electric consumption 1

11.43 Php 1.10 kWh 1 hr

B. Lubricant Cost (LuC)

LuC = (1.5%) ∗ (EC)

LuC = 0.015 ∗ 0.31 Php/kg

𝐋𝐮𝐂 = 𝟎. 𝟎𝟎𝟓 𝐏𝐡𝐩/𝐤𝐠

C. Packaging Cost (PC)

5|Page AB 17 – Machine Design for AB Production (Laboratory)

D. Labor Cost (LC)

438 Php 1 day 1 hr

E. Raw Pig Pellet Material (PiM)

𝐏𝐢𝐌 = 𝟏𝟖. 𝟑𝟓 𝐏𝐡𝐩/𝐤𝐠

F. Raw Poultry Pellet Material (PiM) = 20.38 Php/kg - Appendix

Variable Cost (Php/y)

A. Electricity Cost (EC)

rate electric consumption hourly operation

11.43 Php 1.10 kWh 6 hrs 52 days

B. Lubricant Cost (LuC)

LuC = (1.5%) ∗ (EC)

𝐋𝐮𝐂 = 𝟓𝟖. 𝟖𝟒 𝐏𝐡𝐩/𝐲

C. Packaging Cost (PC)

6|Page AB 17 – Machine Design for AB Production (Laboratory)

12 Php 1 bag 41 kg 6 hrs 52 days

D. Labor Cost (LC)

438 Php 52 days