Evaluate the economics of a biological emission control system and compare it to

Question

Evaluate the economics of a biological emission control system and compare it to the thermal/incineration system. For the biological based treatment system, the capital cost is $100,000 with routine maintenance costing $15,000 per year for the first 15 years and $20,000 per year for the next 10 years. The useful life of the biofiltration system is 25 years and the salvage value is $25,000.The PR staff estimate using the green technology will save $8,000 in reduced community outreach programs annually. The project team estimates the waste output reduction savings to be $26,500/yr and the benefits of the chance weighted carbon credits savings to be $17,000 annually. The discount rate is assumed to be 5% by your corporate office.

A) Draw a cash flow diagram for the thermal/incinerator system and the biological-based treatment system economics.

B) What is the equivalent present value (year 0) cost of the salvage value for the biofiltration system at 25 years?

C) What is the equivalent present value/cost (year 0) of the total maintenance costs for the biofiltration system?

D) What is the total net equivalent present value (year 0) for the biofiltration system?

E) What is the payout for the biofiltration system?

F) What is the rate of return (ROR) of the biofiltration system?

G) Which emission control system is the most cost effective in terms of NPV, payout, and ROR? Explain.

Explanation / Answer

Ans Note Could not do the cash flow diagram part. Also not able distinguish between cost and benefit of two systems. So every given details are assumed to be for biofiltration system.

Workings

Ans Details Amount B Present Value of slavage value          7,382.57 C What is the equivalent present value/cost (year 0) of the total maintenance costs for the biofiltration system    2,29,980.60 D What is the total net equivalent present value (year 0) for the biofiltration system?    4,03,240.11 E Payout ( Assumed to be initial Payout)    1,00,000.00

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