To be a worthwhile investment, a venture for the installation
of a new chemical product manufacturing facility, a new
chemical plant, or a revamp of an existing plant must be
profitable. However, it is not sufficient that a venture make a
large net profit. That profit over the life of the venture must be
more than the original capital investment for the venture. The
greater the excess of profits over investment, the more
attractive is the venture. To compare alternative ventures
that vie for capital investment, a number of profitability
measures have been developed. They are all based on the
estimates of capital investment and annual earnings that have
been presented in Chapter 22 and the previous sections of this
chapter. The simpler, approximate measures discussed in this
section and summarized in Table 23.5 ignore the effect of
inflation or so-called time value of money and use simple
straight-line depreciation. Therefore, they are only useful in