Hi Zeev,
<<<The hurdle was set at an internal rate of return of 6% when operating at 110% of capacity. Of course, that company is no longer around (and I left long before it went down the drain, in great part because of these strange "standards"), but that 110% always struck me as strange, and every time I see report of "capacity utilization", I ask myself what it means.>>>
An old industrial chemistry professor used to teach his class of budding chemists that when installing new capacity in plants, you must be aware of country differences in production capability of the reaction vessels. He taught us that if you bought a German vessel, the nameplate capacity was what it would produce. Once installed, you could expect it to initially give about 90%, and after some tweaking, 100%.
An American vessel was a different beast. This would initially only give about 65%, but with tweaking would over a year or two, give 120%.
He then went on to mention a number of other countries, and rules of thumb for them,...some he cautioned would never give rated capacity (gggggggggggggg).
Perhaps the above sheds some light on your strange "standards". |
