United States
         Environmental Protection
         Agency
Office of Pollution Prevention
and Toxics (MC7409)
Washington, DC 20460
EPA 742-B-96-007
 December 1996
SEPA   P2/FINANCE Version 3.0
         in Lotus 1-2-3 Version 3.4a
         far DOS
         User's Guide

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User's Guide
       P2/FINANCE
             Version 3.0
    in Lotus 1-2-3 Version 3.4a for DOS
                        Tellus Institute
                         Copyright © 1996

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Tellus Institute
P2/FINANCE
Version 3.0

in Lotus 1-2-3 Version 3.4a for DOS
User's Guide
Tellus Institute
11 Arlington Street
Boston, MA 02116-3411
USA
Telephone:
Fax:
Email:
617-266-5400
617-266-8303
p2finance@tellus.com
Copyright © 1996 Tellus Institute, Boston, MA USA.  All rights reserved. No
part of this publication or associated software may be reproduced or transmitted in
any form or by any means, without prior written permission.

November 1996

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Acknowledgments
Tellus Institute developed P2/FINANCE Version 3.0 with funding from the US Environmental
Protection Agency's Pollution Prevention Division.  We gratefully acknowledge the support
provided by Susan McLaughlin (EPA Project Manager), Holly Elwood, Kathy Seikel, and Alan
EhrlichofEPA.

We thank all of the reviewers of both the software and User's Guide:  Cathy Andrews, Naval
Surface Warfare Center; Robert Butner, Battelle Seattle Research Center; and Keith Weitz and
Aarti  Sharma, Research Triangle Institute.   We  also  thank users  of  earlier versions of
P2/FINANCE who provided us with valuable feedback on how to improve the tool.

The Tellus project team included Angela Dierks, Deborah Savage (Project Manager), Pablo
Martinez, Rob Graff, Katherine Bidwell, David Miller, Dan  Smith, Diana Zinkl, and Allen
White.

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Table  of Contents
PREFACE	i
1.  INTRODUCTION

INTRODUCTION	*	1-1
BASIC OPERATIONS	1-3
GETTING STARTED IN P2/FINANCE	1^4
   Elements of a Financial Analysis	1-4
   Terminology	1—4
     Cost Item	1-5
     Cost Category	1-5
     Scenario	1—5
     Analysis	1-5
     Project	'.	1-5
   Format Conventions	1—6
   Lotus Tips	1—6
   Spreadsheet Protection	7-7
COMPUTER SPECIFICATIONS	1-7
   Hardware and Software Specifications	7—7
   Operating P2/FINANCE in Lotus for Windows	1-8
INSTALLATION	1-8

2.  STEP BY STEP INSTRUCTIONS: ENTERING DATA
MAIN MENU SHEET	2-1
   Returning to the Main Menu with Alt+M.	2-7
   Moving Between Scenarios with Alt+C	2-7
   Going to a Section of the Software with Alt+G	2—2
   Implementing Default Parameters withAlt+D	2—2
   Printing a Worksheet with AU+P	2-3
   Saving the File with Alt+S	2-4
   Accessing the On-line Help Screen with Alt+H.	2-4
   Changing the Display with Alt+Z	2-4
PROJECT TITLE SHEET	2-5
   Accessing Scenarios	2-5
   Printing Scenarios	2-5
   Accessing Help	2—5
DEFAULT PARAMETERS SHEET	2-6
   Time Value of Money	2-7
   Global Parameters	2-8
     Inflation Rate	2-8
     Discount Rate	2-8
     Income Tax Rates	2-10
     Depreciation	2-11
   Scenario Parameters	2-74
     Name	2-14
     Investment Year	2-14
     Lifetime	2-14
     Start Year	2-15
     End Year	2-15
   Accessing Scenarios	2-75
   Printing Scenarios	2—75
   Accessing Help	2—7(5
INITIAL INVESTMENT COSTS SHEET	2-17

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   Salvage Value	2-19
   Tailoring the Financial Parameters.	2-19
   Working Capital.	2-20
   Accessing Scenarios	2—27
   Printing Scenarios	2-27
   Accessing Help	2-22
ANNUAL OPERATING COSTS SHEET	:	2-23
   Escalation Rate	2-24
   Tailoring the Financial Parameters.	2-24
   Accessing Other Scenarios.	2-25
   Printing Scenarios	2-25
   Accessing Help	2-25
3. CALCULATING THE BOTTOM LINE: GENERATING REPORTS

SCENARIO SUMMARY REPORT	3-2
   Accessing Other Scenarios.	3-3
   Printing Scenarios	3-3
   Accessing Help	3-3
TAX DEDUCTION SCHEDULE	3-5
   Accessing Other Scenarios.	,3-7
   Printing Scenarios	3-7
   Accessing Help	3-8
INCREMENTAL CASH FLOW ANALYSIS SHEET	3-9
   Accessing Other Scenarios.	3-70
   Printing Scenarios	3-77
   Accessing Help	3-77
INCREMENTAL PROFITABILITY ANALYSIS SHEET	3-12
   Net Present Value (NPV)	3-72
   Internal Rate of Return (IRR)	3-72
   Discounted Payback.	3-73
   Accessing Scenarios	3-14
   Printing Scenarios	3-14
   Accessing Help.	3-14

4. CASE STUDIES
AN EXAMPLE OF A BASIC ANALYSIS	4-1
   Conceptualise the Analysis	4-1
     Develop a Cost Inventory	4-1
     Collect Cost Data	4-2
   Enter the Financial Parameters	4-4
     Default Parameters sheet	4-5
   Enter the Cost Data	4-5
     Initial Investment Costs sheet	4-5
     Annual Operating Costs sheet	4-6
   Generate Reports	4-7
     Scenario Summary sheet	4-7
     Tax Deduction Schedule sheet	4-7
     Incremental Cash Flow Analysis sheet	4-7
     Incremental Profitability Analysis sheet	4-7
   Summary of Results	4-8
AN EXAMPLE OF A COMPLEX ANALYSIS	4-28
   Conceptualise (he Analysis	4-28
     Develop a Cost Inventory	4-28
     Collect Cost Data	4-29
   Enter the Financial Parameters	4-36

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     Default Parameters for the Analysis	4-36
   Enter the Cost Data	4-36
     Initial Investment Costs sheet	4-36
     Annual Operating Costs sheet	4—37
   Generate Reports	4-38
     Scenario Summary sheet	4-38
     Tax Deduction Schedule sheet	,	4-38
     Incremental Cash Flow Analysis sheet	4-39
     Incremental Profitability Analysis sheet	4—39
   Summary of Results	4—39

APPENDICES

APPENDIX A: COPY OF THE BLANK SPREADSHEET	A-l
APPENDIX B:  TOTAL COST ASSESSMENT COST INVENTORY	B-l
APPENDIX C:  GLOSSARY OF FINANCIAL TERMS	C-l

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Preface
Welcome to P2/FINANCE Version 3.0 programmed in Lotus 1-2-3 Version 3.4a for DOS. This
powerful spreadsheet-based program is designed to assist you in evaluating the profitability of
pollution prevention (P2) and other investments with environmental implications. Version 3.0
represents a major upgrade of P2/FINANCE in which flexibility and user friendliness couple to
create a  more versatile  financial analysis tool.  A grant from US Environmental Protection
Agency's Pollution  Prevention  Division  supported the  development  of this  version  of
P2/FINANCE.

The User's Guide offers  step-by-step instructions for installing and using P2/FINANCE, as well
as an introduction to the principles  of financial analysis.  We recommend that you read this
Guide while using the software for your first few analyses. The Guide assumes familiarity with
Microsoft DOS and Lotus 1-2-3 for DOS. For further information on these software packages,
please refer to an appropriate user guide.

This Guide is organized into  three main sections.  The  Introduction explains the Total Cost
Assessment framework used by P2/FINANCE, computer requirements for  the software, and
installation procedures.  The Step-by-Step Instructions provide detailed instructions on how to
conduct a financial analysis with P2/FINANCE and define relevant financial analysis concepts.
The  section on Calculating  the  Bottom  Line:  Generating Reports describes the various
software  screens that illustrate the calculated results and the printed reports  you can generate.
The Case Studies demonstrate real world application of  the software through two case studies:
one basic analysis and a second, more complex, analysis.

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1.  Introduction

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           P2/FINANCE Version 3.0
Introduction
            Introduction

            Before you make a modification to your current process (e.g., switch to an aqueous cleaner or
            purchase a solvent still to recover spent raw materials), you need to understand the financial
            impacts of such a modification. P2/FINANCE helps your decision-making by providing a
            framework for assessing the profitability of potential  investments.  In a P2/FINANCE
            analysis you estimate the costs and revenues—both Initial Investment Costs and Annual
            Operating Costs  and revenues—of a potential pollution prevention investment or other
            investment  with environmental implications.   This   information,  together  with other
            qualitative information, provides a solid foundation for making your investment decision.

  Pollution  Pollution prevention (P2) refers to techniques that reduce pollutants at their source rather
 Prevention  than controlling pollutants through end-of-pipe  controls after they are generated.   For
       (P2)  example, if you are attempting to minimize volatile organic compound (VOC) emissions, P2
            techniques may include implementing workplace practices that increase the efficiency of the
            use of VOC-containing materials  or  reducing or eliminating VOC-containing materials
            altogether. A pollution control approach, on the other hand, would limit the release of VOCs
            into the atmosphere via control technologies such as carbon adsorption or incineration. P2
            has several advantages over traditional pollution control approaches:

                  •  It may be more  effective  than pollution control  at reducing the amount of
                     pollution because it reduces in-process emissions;

                  •  It reduces legal liability costs  by  decreasing the  possibility of chemical waste
                     accidents and disposals;

                  •  It may reduce costs associated  with the  procurement, storage,  monitoring,
                     permitting^and disposal of hazardous materials;

                  •  It may enhance production efficiency, thereby decreasing production costs; and

                  •  It may allow firms to avoid future regulatory requirements; and

                  •  It may enhance corporate image and stakeholder relations.

  Total Cost Companies commonly think of environmental investments from a "must-do" perspective, as
Assessment a costly diversion from profit-adding projects. Total Cost Assessment (TCA) is an approach
      (TCA) to overcoming these obstacles to P2 investments, putting them  on the same footing as other
            potential uses of a firm's limited capital resources. TCA differs from conventional practices
            in four key ways:

                  •  Expands the inventory  of costs, savings, and revenues to include indirect,  less
                     tangible items typically omitted from project profitability analyses;
                                                  1-1

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             P2/FINANCE Version 3.0
Introduction
                    •  Highlights the accurate allocation of costs and savings to specific process and
                       product lines rather than lumping them into overhead accounts;

                    •  Extends the time horizon of the analysis to account for  longer-term costs and
                       savings typical of P2 investments; and

                    •  Uses profitability indicators capable of capturing longer-term costs and savings
                       and the time value of money.

             In short, P2/FINANCE  helps operationalize TCA concepts by providing a tool for an
             expanded cost/savings inventory, accurate cost allocation, longer time horizons, and multiple
             profitability indicators.1  Together, these elements help provide a clear picture  of the true
             profitability of a P2 project.

   Analysis  In a P2/FINANCE analysis, you define the financial parameters (e.g.,  tax rate, inflation rate)
   Structure  for the project  and then  input  cost and  revenue data for both your business-as-usual
             operations  (Base Scenario) and  a proposed investment (Alternative Scenario).  In each
             project, you may define two Alternative Scenarios to compare with a single Base Scenario.
             P2/FINANCE  generates  four reports—Scenario Summary,  Tax  Deduction   Schedule,
             Incremental Cash Flow Analysis, and  Incremental Profitability Analysis.  Each offers a
             different perspective to assist you  hi  understanding the  economics  of a potential  P2
             investment

  Enhanced  Version 3.0 of P2/FINANCE contains significant enhancements to Version 2.2 in terms of
  Flexibility  flexibility' and specificity.  Using  this version, you can define investments that  occur over
             multiple years, specify an escalation  rate for individual Annual Operating Cost  categories,
             and select a  different depreciation  method for each  Initial  Investment  Cost category.
             P2/FINANCE provides this flexibility while maintaining a user-friendly structure, enabling
             first-time users to easily input cost data and calculate profitability.

On-line Help  P2/FINANCE contains on-line help screens to walk you through the steps of a TCA analysis.
             Each sheet of the software contains a help screen that briefly describes the  function of the
             sheet and defines relevant financial analysis concepts.  As these help screens provide basic
             instructions  only, we encourage you to refer to the User's  Guide  for  more detailed
             instructions.

             Interested parties may request a free copy of P2/FINANCE  Version  3.0 from the  US
             Environmental Protection Agency's Pollution Prevention Information  Clearinghouse at (202)
             1 For a more detailed explanation of TCA, see:  1) Allen White, "Accounting for Pollution Prevention," EPA
             Journal, July-September 1993, pp. 23-25. 2) Deborah E. Savage and Allen L. White, "New Applications of
             Total Cost Assessment,"  Pollution Prevention Review, Winter 1994-95, pp. 7-15.  3) Allen White, Monica
             Becker, and James Goldstein, Total Cost Assessment:  Accelerating Industrial Pollution Prevention Through
             Innovative Project Financial Analysis With Applications to the Pulp and Paper Industry, December 1991.
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           P2/FHNANCE Version 3.0
Introduction
 Obtaining  260-1023 or ppic@epamail.epa.gov.  The software also is available from EPA's web site:
      P2/-  http://es.inel.gov/partners/acctg.  Some technical support is available from Tellus Institute.
 FINANCE  To obtain assistance, telephone 617-266-5400 and request P2/FINANCE Technical Support.
           Email inquiries may be sent to p2finance@tellus.com.
           Basic Operations
           P2/FINANCE helps you make decisions about how to most effectively use limited capital
           resources. It calculates the profitability of a potential investment by weighing the initial cost
           of the investment against the revenues or operating cost savings generated by the investment.
           A typical financial ainalysis using P2/FINANCE includes the following steps:

                  •  Conceptualize the Analysis;
                  •  Enter the Financial Parameters;
                  •  Enter the Cost Data; and
                  •  Generate Reports
  Concept- Your first  step in P2/FINANCE is  to  conceptualize, or design,  the  analysis.  Are you
  ualize the considering an expansion of your  current capacity?   Are  you  considering a  process
  Analysis modification?  As you envision the analysis, consider the broad categories of costs that either
           occur one time as part of the initial investment (e.g., Site Preparation costs) or might change
           on an annual  basis as a result of the investment  (e.g., Utility costs).  To assist you in
           developing this list of cost categories, refer to the generic cost/savings inventory found in
           Appendix A.  Using  this generic inventory,  ask yourself two questions about each cost
           category:  1) Are such costs relevant to the analysis? and 2) Are such costs significant*? For
           each cost category that you deem to be both relevant and significant, identify the specific cost
           items (e.g., electricity, gas) within that cost category related  to the analysis.   With your
           customized TCA  cost inventory in hand, prioritize the  cost items, choosing  to most
           accurately quantify those items that make best use of your limited resources. Cost items that
           you  decide not to include in the  quantitative  analysis should be noted as  qualitative
           considerations, so that you continue to keep the broader picture in view.

  Enter the With a vision of the analysis in mind, your next P2/FINANCE task consists of specifying the
  Financial default financial parameters for the analysis. These  parameters provide a framework for the
Parameters analysis and include parameters related to the project as a whole as well as those specific to
           individual scenarios.  Many of these default financial parameters can be tailored later for the
           individual cost categories  within each scenario.  Define the Inflation Rate, Discount Rate,
           Income Tax Rates, default Depreciation Method, and default  Depreciation Period for the
           project, as well as the Name, default Investment Year, and default Lifetime  for each scenario.
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         P2/FINANCE Version 3.0
Introduction
 Enter the Input the relevant initial investment and Annual Operating Costs and revenues for both the
Cost Data Base and the Alternative Scenarios. As you enter cost data, reconfirm that you have included
         all relevant costs, even those indirectly related to the potential investment.  For example, a
         change to painting operations may require a change in upstream degreasing operations with
         relevant cost implications. These second order effects can be as significant as, or even more
         significant than, direct first order effects.

 Generate Once you have defined the financial parameters and cost data for an analysis, the next step is
  Reports to generate reports in P2/FINANCE.  You can access Scenario Summaries to review the
         contents  of each scenario,  Tax Deduction Schedules  to  take a closer  look  at the tax
         deductions  allowed for each scenario, Incremental  Cash Flow Analyses to  calculate the
         discounted cash flows of the comparison between a Base and an Alternative Scenario, and the
         Incremental Profitability Analysis to review profitability indicators such as Net Present
         Value, Internal Rate of Return, and Discounted Payback.
         Getting Started  in P2/FINANCE

         This section sets the stage for the remaining sections of the Guide by detailing the elements
         of a financial analysis, defining important terms used throughout the Guide, and providing
         some tips on using Lotus 1-2-3.
         Elements of a Financial Analysis

         Financial analysis is used to estimate the profitability of a potential investment.  It includes
         two types of information:   1) financial parameters and 2) cost  and revenue data.  The
         financial parameters include information on depreciation, inflation, income tax rates, your
         firm's discount rate, and the timing of the initial investment and Annual Operating Costs.
         (These parameters are discussed in more detail on pages 2-6 through 2-15 of the Guide). The
         cost and revenue data include both Initial Investment Costs and Annual Operating Costs.

         Note:  Throughout the Guide "cost" is used to indicate both costs,  cost savings, and
         revenues except where noted. Profitability is used throughout the Guide as a measure
         of the investment's performance, not as a formal accounting term.
         Terminology

         P2/FINANCE combines financial and cost elements together to create a financial analysis.
         Terms are used consistently to differentiate these elements and their functions.  Figures for
         many of the terms illustrate the relationship between the various P2/FINANCE elements.
                                              1-4

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P2/FINANCE Version 3.0
                                                                       Introduction
Cost Item
Cost item refers to the name of a specific cost or revenue included in the analysis. Cost items
can be related to the initial investment or to Annual Operating Costs and revenues. Steam,
for example, is an operating cost item.  Identify the relevant cost items for each scenario,
keeping in mind that they can vary from one scenario to another.
                                                                  Utilities
Cost Category
Cost  items  that are  similar to one  another  are  grouped
together into broader cost categories.  Again, there are cost
categories for both initial investment and Annual Operating
Costs. For example, the cost item Steam would be included
in the Annual Operating Cost category called  Utilities.  In
P2/FINANCE,  you can modify the names  of the cost
categories to be  used in the analysis  while  working  on   v	/
Alternative Scenario 1. These changes to Alternative Scenario 1 will also carry through to
Alternative Scenario 2 and the Base Scenario  because cost category names must remain
consistent between the Base and the Alternative Scenarios for reporting purposes.
                                                           Steam     Water
                                                           Electricity  Gas
                                                           Oil        Sewerage
Scenario
A scenario contains all cost data and financial parameters
related to a potential investment (an Alternative Scenario) or
for  the  current  business-as-usual  practices  (the  Base
Scenario).
                                                                 Scenario
                                                          Financial Parameters
                                                            Initial Investment Costs
                                                          Annual Operating Costs
Analysis
An analysis estimates the profitability of an Alternative
Scenario in comparison with  the Base Scenario.  To
calculate the  profitability  of an  investment without
comparing  it to  business-as-usual operations, leave the
Base Scenario empty.
Project
A project comprises all data from the Base Scenario and
Alternative  Scenarios  and  is  equivalent  to  a  Lotus
worksheet file.
                                                               Analysis
                                                      Al
                                                                Project
                                                                Base

                                                       Alternative 1  Alternative 2
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P2/FINANCE Version 3.0
Introduction
Format Conventions

Formats such as color and font styles are used consistently throughout P2/FINANCE and its
User's Guide.

P2/FINANCE uses color to indicate areas for user input throughout the software. Only cells
with a yellow background allow user input; all other cells are locked and do not allow user
modifications.   Cells  with  a green  or  blue background  contain  important  on-screen
information for the user.

P2/FINANCE's User Guide  uses font styles to illustrate certain features of the software.
Bold text indicates user input.  Similarly, text phrases with the first letter of each word
capitalized reflect the labels of data entry fields and other on-screen titles. For example, in
the statement, "Again,  because the vendor disposal cost for both products does not begin
until Year 4, the environmental engineer defines the Start Year for that category as 4," the
bold text indicates that the user should input "4" into the field labeled "Start Year." The
titles of all sheets in the software, such as the Default Parameters sheet, are also capitalized.
Lotus Tips

Although this Guide assumes user familiarity with Lotus 1-2-3 for DOS, some general tips on
Lotus operations appear below. Access the Lotus Menu (which differs from the Main Menu
for the P2/FINANCE program) by typing:  /. Within this menu you can use the cursor to
highlight an option or select the first letter  of the desired option to activate a function.  In
Lotus 1-2-3 for DOS, you do not have to hit enter to activate a function.  As is common in
many DOS programs, Lotus contains layered menus. In some cases, you need to type several
letters to activate a function.  For example, to retrieve (i.e., open) a worksheet, type: /FR
(forward slash, File, Retrieve).

P2/FINANCE rarely requires you to use the Lotus Menu. Instead, P2/FINANCE contains a
Main Menu with many common commands (discussed in more detail on pages 2-1 through
2-4).  Access this Main Menu by typing: Alt+M. All Main Menu commands are activated
by typing: Alt+letter.

Note: The notation Alt+M, as used above, indicates that you should hold down the Alt
key while you type m.

The Lotus Menu, however, does provide some important functions. To open a P2/FINANCE
file, type:  /FR and input the address of the file. To quit the software, type: /Q. If you have
not saved your changes, Lotus will ask you if you are sure you want to quit.  To exit without
saving,  type: Y. However, to return to Lotus, type: N. To save the file under a new name,
type:  /FS and type the new address and name for the  file. To define a default directory  for
Lotus, type: /FD and type the new directory address.
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P2/FINANCE Version 3.0
Introduction
In Lotus, different on-screen messages inform you of P2/FINANCE's current status.  When
P2/FINANCE is in the midst of a function, a red WAIT message appears in the top right
corner  of  the screen, indicating that you must wait to continue  your  analysis.  When
P2/FINANCE is in the process of updating the calculations, a red CALC message appears at
the bottom of the screen.  By default, P2/FINANCE is set  to automatic recalculation.
Therefore,  every time you make a change to your file, P2/FINANCE updates the calculations.
You can set P2/FINANCE to operate in manual recalculation mode by typing:  AVGRM. If
you set the recalculation to manual, P2/FINANCE automatically recalculates before you print
any portion of the files or exit the file.  When you  are experiencing memory constraints, a
blue MEM message appears at the bottom of the screen.
Spreadsheet Protection

P2/FINANCE is a protected spreadsheet; cells not requiring user input and cells containing
formulas are locked and cannot be modified.  Additionally, the file cannot be linked to other
files.  Protection of this type is necessary to maintain quality control over  the program.
Protection of P2/FINANCE ensures that you receive a high quality tool.
Computer Specifications
P2/FINANCE was  programmed  in  Lotus  1-2-3  Version 3.4a for DOS.   We  tested
P2/FINANCE in Lotus 1-2-3 Version 3.4a for DOS with several different versions of DOS,
including Versions 5.0, 6.2, and 6.22.  We also performed limited testing in Lotus 1-2-3
Release 5.0 for Windows.  P2/FINANCE should function in other combinations of Lotus
(e.g., Lotus 1-2-3 Version 3.1 (or higher) for DOS) and DOS, but these combinations have
not been tested.
Hardware and Software Specifications

Certain  minimum  hardware  and  software  specifications  must be  met  to operate
P2/FINANCE.  In addition to these minimum specifications, we have defined a set of
recommended hardware and  software specifications that  will  facilitate your use  of
P2/FINANCE, but are not absolutely essential for its operation.  Table 1 lists both the
minimum and recommended hardware specifications.
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P2/FINANCE Version 3.0
Introduction
 Table 1. Specifications for Operating P2/FINANCE Version 3.0 in Lotus 1-2-3 Version
                                 3.4a for DOS
Minimum Specifications
Computer Chip
DOS Version
Memory (RAM)
Disk Space
Mouse?
Color Monitor?
386
5.0
6 Megabytes
2 Megabytes
No
No
Recommended Specifications
486 or Pentium
6.22
8 Megabytes
2 Megabytes
Yes
Yes
Beyond  these minimum requirements, P2/FINANCE runs appreciably  faster with more
memory (RAM).
Operating P2/FINANCE in Lotus for Windows

P2/FINANCE was developed for use in Lotus for DOS. Limited testing and informal user
feedback  indicate that the software will function in Lotus for  Windows  with  some
modifications. Main Menu commands that require Alt+Ietter for implementation instead use
Ctrl-Hetter.

Note: Remember, however, that the use of the software in Lotus for Windows has not
been tested thoroughly.  Therefore, Tellus Institute does not recommend the use of
P2/FINANCE in Lotus for Windows.
Installation

To install P2/FINANCE Version 3.0 programmed in Lotus 1-2-3 Version 3.4a for DOS, load
the Installation Disk in your disk drive and type:

            [disk drive letter]:\p2flotus

This action unzips the spreadsheet and copies two  files into  a C:\P2FLOTUS directory:
P2F1NAK WK3 and P2FINAN.FM3.  P2FINAN. WK3 is an empty template that must be copied
for  each  project  analysis.   P2FINAN.FM3 contains  the  format  specifications  for
P2FINAN.WK3.

When you are ready to enter data into the spreadsheet, save the P2FINAN files under a new
name to use for a particular project. Note that the file extension, either . WK3 or .FM3, may not
be changed and that the. WK3 and .FM3 files must have the same name. When opening a. WK3
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P2/FINANCE Version 3.0
Introduction
file, P2/FINANCE searches in the same directory for an .FM3 file of the same name to describe
the formatting for the spreadsheet.

Note: You may reinstall the software at any time to generate a blank spreadsheet with the
name P2FINAN.WK3
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2. Step by Step
  Instructions:
   Entering Data

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P2/FINA1NCE Version 3.0
Step by Step Instructions: Entering Data
Main  Menu Sheet

When you first open the P2FINAN. WK3 file, you enter the Main Menu of P2/FINANCE, which
contains a list of the commands (i.e., macros) used to activate numerous administrative functions.
You can activate the following commands from anywhere within P2/FINANCE:

      •  Alt+M: Return to this MAIN menu

      •  Alt+C: Access CHANGE menu (Change from one scenario to another)

      •  Alt+G: Access GOTO menu (Go to a different sheet in the project file)

      •  Alt+D: Implement DEFAULTS set on Default Parameters sheet

      •  Alt+P: Access PRINT menu (Print sheets)

      •  Alt+S: SAVE the project file under the current name

      •  Alt+H: Access on-line HELP screen for sheet

      •  Alt+Z: Access ZOOM menu (Change number of rows & columns displayed)
Note: When activating any of the Main Menu options, make sure that a Lotus Menu does
not appear at the top of the screen.  A beep indicates that you have attempted to activate a
Main Menu command (through an Alt+letter command) with a Lotus Menu displayed. To
remove the Lotus Menu, click the mouse pointer on the worksheet or press ESC until a Lotus
menu no longer remains on the screen.
Returning to the Main Menu with Alt+M

Selecting Alt+M from anywhere in the file returns you to the Main Menu, where you can refer to
the list of Main Menu commands.
Moving Between Scenarios with Alt+C

Alt+C allows you to move between scenarios (e.g., from Alternative Scenario 1 to Alternative
Scenario 2 within the Initial Investment Costs sheet), differing from Alt+G, which allows you to
move between sheets within a scenario.  Selecting Alt+C opens a menu at the top of the screen
listing the following codes for the three scenarios:
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       •  1         Alternative Scenario 1
       •  2         Alternative Scenario 2
       •  Base     Base Scenario

 To access a scenario for the current sheet, type the first letter of its code or use a cursor or mouse
 to highlight the code.  Some sheets, such as the Default Parameters sheet and the Incremental
 Profitability Analysis sheet, contain a single sheet that applies to all three scenarios.  For these
 sheets, the Alt+C menu appears at the top of the screen, but does not function.


 Going to a Section of the Software with Alt+G

 Selecting Alt+G opens a menu at the top  of the screen, listing the following codes that refer to
 sections, or sheets, of the software as follows:

       •  Project          Project Title  sheet
       •  Default          Default Parameters sheet
       •  Investment      Initial Investment Costs sheet
       •  Operating       Annual Operating Costs sheet
       •  Summary        Scenario Summary sheet
       •  TaxJDed        Tax Deduction Schedule sheet
       •  CashJFlow      Incremental Cash Flow Analysis sheet
       •  Analysis         Incremental Profitability Analysis sheet

To go to a sheet, type the first letter of its code or use a cursor or mouse to highlight the code for
the desired section.  Most sheets contain multiple pages that you can access by scrolling down or
across the screen.

In moving between sheets, P2/FINANCE  remembers the scenario on which you were working
and automatically takes you to that scenario in the new sheet.  For example, when you go to the
Annual Operating Costs sheet (by typing Alt+G, O), from the Alternative Scenario 2  section of
the Initial Investment  Costs sheet, P2/FINANCE automatically  places you in the Alternative
Scenario 2 section of the Annual Operating Costs sheet.
Implementing Default Parameters with Alt+D

P2/FINANCE allows you to define a set of default financial parameters for the analysis on the
Default Parameters sheet.  These Default Parameters include both Global Parameters that apply
to all  three scenarios—namely, Inflation  Rate, Discount Rate, Income Tax Rates,  default
Depreciation Method, and default Depreciation Period—and Scenario Parameters that differ for
the three scenarios—Name, default Investment Year, and default Lifetime.   Many of these
defaults later can be modified for individual cost categories within a scenario.
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P2/FINANCE applies some of these parameters—namely, Inflation Rate, Discount Rate, and
Income Tax Rates—to the analysis automatically, i.e., as soon as you type in the desired value.
However, for those parameters that later can be tailored for individual cost categories—default
Depreciation Method,  default Depreciation Period,  default Investment Year,  and  default
Lifetime—P2/FINANCE implements the default values you type in only after you select Alt+D.
For these parameters, activating Alt+D deletes ALL prior tailoring for individual cost categories.
For example, suppose you change the default Investment Year for Alternative Scenario 1 to Year
2. If you had already tailored some Initial Investment Cost categories to Year 3, selecting Alt+D
reverts the Investment Year for all cost  categories in the Alternative Scenario 1  to Year 2.  As
this command has the potential to delete previous tailoring work, P2/FINANCE asks you twice if
you are sure that you want to Apply Defaults.  After implementing Alt+D, you can tailor the
financial parameters for each cost category in the Initial Investment Costs and Annual Operating
Costs sheets.
Printing a Worksheet with Alt+P

P2/FINANCE contains a print macro file to simplify printing. To print a section of your file, select
Alt+P to access the print menu, which provides the following options:

       •  Project           Project Title sheet
       •  Default           Default Parameters sheet
       •  Investment       Initial Investment Costs sheet
       •  Operating        Annual Operating Costs sheet
       •  Summary        Scenario Summary sheet
       •  Tax_Ded         Tax Deduction Schedule sheet
       •  Cash_Flow       Incremental Cash Flow Analysis sheet
       •  Analysis          Incremental Profitability Analysis sheet

To print a section of a sheet, type the first letter of its title or use a cursor or mouse to highlight
the  code for the desired section.   Selecting Investment, Operating, Summary,  Tax_Ded,  or
Cash_Flow brings you to another set of menu options:
          1
          2
          Base
          All
Alternative Scenario 1
Alternative Scenario 2
Base Scenario
All Scenarios
Note:  The Incremental Cash Flow Analysis sheet compares Alternative Scenario 1 to the
Base Scenario, and also Alternative Scenario 2 to the Base Scenario.  It does not contain a
separate section pertaining to the Base Scenario, therefore, you cannot choose to print the
Base Scenario for this sheet.
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P2/FINANCE prints the reports in black and white using a Swiss 6 point font. Data entry cells that
appear yellow on the screen are slightly shaded on the printed report.  P2/FINANCE's default
printer configuration is set for HP LaserJet 4, output device LPT1, lower tray.  To change these
settings, consult a Lotus 1-2-3 user's manual.

Note:  Experienced Lotus 1-2-3 users can set their own print areas  and use the "Print"
command from the Lotus Menu instead of using the print macro, if desired.
Saving the File with Alt+S

Selecting Alt+S automatically saves the file under its current name.  To save the file under a
different name, use the File/Save option from the standard Lotus Menu as described earlier in this
Guide on page 1-6.
Accessing the On-line Help Screen with Alt+H

Selecting Alt+H automatically takes you to the on-line help screen for the current sheet.  To exit
the help screen, select the HOME key to return to the top of the sheet, select Alt+C to move to a
scenario within the sheet, or select Alt+G to move to the top of another sheet.  The help screens
briefly describe the functions and tasks associated  with the sheet.  Please refer to the User's
Guide for further information on a particular topic.
Changing the Display with Alt+Z

Selecting Alt+Z opens the following menu that enables you to change the worksheet display by
shrinking or expanding the font for on-screen displays:

       •   Tiny      Reduce cells to 63% of their normal size
       •   Small     Reduce cells to 87% of their normal size
       •   Normal    Display cells at their normal size
       •   Large     Enlarge cells to 125% of their normal size
       •   Huge     Enlarge cells to 150% of their normal size
       •   Manual    Enlarge or reduce the size of cells

Alt+Z has no effect on the font size used for printed copies of the worksheet.
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 Project Title Sheet
 On the Project Title sheet, enter descriptive information about the project for later reference.  At the
 top of the sheet, enter the date of the analysis. For example, to enter January 25, 1996, type: Date:
 1/25/96. Enter a name for the project in the yellow field to the right of the words Project Title.

 Note:  P2/FINANCE automatically copies the project name and date entered here to the top
 of other spreadsheet pages.

 In the remaining yellow fields,  enter your name, the name of your organization, and other
 information about the analysis. For example, you can  enter the  analysis assumptions as well as
 qualitative considerations related to the project hi the Comments section.
Accessing Scenarios

The Project Title sheet does not contain different sections for each scenario. Therefore, Alt+C
does not function within this sheet. When you select Alt+C, the menu of different scenarios
appears at the top of the screen, but the selection of a scenario does not change your location in
the sheet.
Printing Scenarios

To print the Project Title sheet, select Alt+P to access the general print menu at the top of the
screen. From this menu, choose Project with the cursor or type the letter P.


Accessing Help

To access the on-line help screen for the Project Title sheet, select Alt+H from anywhere within
the sheet. This help screen describes the information requested on the Project Title sheet as well
as provides general information on Total Cost Assessment and financial analysis.  To exit  the
help  screen, select the HOME key to return to the top of this sheet or Alt+G to move to a
different sheet.
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Default  Parameters Sheet

In addition to cost data, P2/FINANCE requires general information about your firm and the
proposed investment in order to calculate profitability.  This additional information., referred to
as the financial  parameters for the analysis, range from the Depreciation Method used for an
investment, to Income Tax Rates for the firm, to the timing of Annual Operating Costs.
Although you can tailor many of these parameters to individual cost categories, P2/FINANCE
allows you to define a set of Default Parameters to use as a starting point.

On the left, the Default Parameters sheet lists Global Parameters, those parameters that apply to
all scenarios within the project.  On the right, the Default Parameters sheet lists Scenario
Parameters. You can define defaults for:
GlobaLParameters
       •  Inflation Rate
       •  Discount Rate
       •  Income Tax Rates (including Local, State, and Federal)
       •  Depreciation Method
       •  Depreciation Period

Scenario Parameters
       •  Name
       •  default Investment Year
       •  default Lifetime
       •  default Start Year
       •  default End Year
                   Applied....
                   automatically
                   automatically
                   automatically
                   using Alt+D
                   using Alt+D
                   automatically
                   using Alt+D
                   using Alt+D
                   using Alt+D
                   using Alt+D
To enter Default Parameters, position your cursor on the appropriate yellow field and enter your
selections.  P2/FINANCE applies some of these parameters—namely, Inflation Rate, Discount
Rate, and Income Tax Rates—to the analysis automatically, i.e.,  as soon as you type in the
desired value.   However,  for  those parameters that  can be tailored for individual cost
categories—default Depreciation Method, default Depreciation Period, default Investment Year,
and  default Lifetime—P2/FINANCE implements them only after you select Alt+D. For these
parameters, activating Alt+D deletes ALL prior tailoring for individual cost categories.  For
example, suppose you change the default Investment Year for Alternative Scenario 1 to Year 2.
If you had already tailored some Initial Investment Cost categories to Year 3, selecting Alt+D
reverts the Investment Year for all cost categories in the Alternative Scenario 1 to Year 2. As
this  command has the potential to delete previous work, P2/FINANCE asks you twice if you are
sure that you want to Apply Defaults. After implementing Alt+D, you can tailor the Default
Parameters for each cost category in the Initial Investment Costs and Annual Operating Costs
sheets.
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 Note: Enter percentages as decimals or with a percent sign (%). For example, to define an
 inflation rate of 3.5%, type: .035 or 3.5%.

 P2/FINANCE allows you to define financial parameters at two levels in the software: 1) on the
 Default Parameters sheet and 2) for individual cost categories on the Initial Investment Costs and
 Annual Operating Costs sheets.  Table 2 displays the levels at which each parameter can be
 defined.

                         Table 2. Levels of Parameter Definition
                          Default Parameters   Initial Investment   Annual Operating
                                 Sheet          Cost Category      Cost Category
Inflation Rate/Escalation
Discount Rate
Income Tax Rates
Depreciation Method
Depreciation Period
Investment Year
Lifetime
Start Year
End Year
X
X
X
X
X
X
X





X
X
X
X


X






X
X
 Time Value of Money

Before describing in detail each financial parameter, it is useful to discuss one key concept in
project financial analysis—the time value of money.

Money has two important characteristics: dollar value and time value.  Most people are familiar
with dollar value, preferring to have $1000 instead of $50. For many people, however, the time
value of money remains confusing.  The time value of money recognizes that the timing of cash
flows is relevant to the profitability of a project. For example, a $200 revenue received in Year 1
is worth more than $200 received in Year 10. The time value of money serves as the basis for
the Inflation Rate, Escalation and the Discount Rate.

Inflation and escalation both reflect the fact that money loses value over time as prices increase.
Discounting accounts for the opportunity cost of selecting one  project over other investment
opportunities. The Inflation Rate, Escalation Rate, and Discount Rate are all described in more
detail in the following section on Global Parameters.
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Global Parameters

On the left of the Default Parameters sheet, P2/FINANCE lists Default Parameters that are
defined for the entire project—Global Parameters.  You can modify some of these  Global
Parameters for individual cost categories.  A description of each follows.
Inflation Rate

Inflation reflects the fact that prices rise over time (e.g., one sheet of printing substrate costs $1
in Year 1, whereas hi Year 2 a sheet of the same substrate costs $1.05).  P2/FINANCE allows
you to choose between two approaches to financial analysis.  In the first ("real") approach, you
do not include an Inflation Rate in the analysis and you apply a real Discount Rate that does not
incorporate inflation. In the second ("nominal") approach, you include an Inflation Rate in the
analysis and apply a nominal Discount Rate that incorporates inflation.  You can choose either
way for your analysis, but make sure that the Discount Rate you choose  corresponds  to the
inflation approach you have selected.

P2/FINANCE allows you to define a global Inflation  Rate on the Default Parameters sheet.
Simply enter a percentage in the data entry field.  P2/FINANCE then applies that percentage to
both the Annual Operating  Costs and  Initial  Investment Costs  over time in  all scenarios.
Applying  a 4.5%  Inflation Rate to an Annual Operating  Cost of $100 inflates that cost to
S104.50 in Year 1, S109.20 hi Year 2, $114.12 in Year 3, $119.25 in Year 4, and so on.

In addition to this global Inflation Rate, P2/FINANCE allows you to assign an Escalation Rate to
Annual Operating Cost categories. Escalation, defined as a percentage, represents cost increases
above the Inflation Rate.  For example, waste disposal costs often rise at a rate  higher than
average inflation.  If you predict that inflation  will be  5%, but that waste  disposal prices  will
increase at an annual rate of 7%, then the Escalation Rate for waste disposal costs is equal to
2%, i.e., the difference between the total increase in prices and the Inflation Rate.  While the
global Inflation Rate is defined on the Default Parameters sheet, Escalation is defined  on the
Annual Operating Costs sheet for individual cost categories.

Note:   Escalation can  be  a negative percentage, indicating that  for  a  particular cost
category, you expect costs to rise at a rate lower than  the global Inflation Rate.
 Discount Rate

 The practice of "discounting" is a way of accounting for a second aspect of the time value of
 money.  When a firm invests its money in the purchase of a piece of equipment now, at "Year-
 zero", the firm expects to see a financial return on this investment over a certain period of time,
 say 3-5  years or even longer.  For example, if a printer buys a new printing press, the firm
 expects to see increased sales revenues via the new production line.  If the printer instead buys a
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 solvent distillation system, the  firm expects to see reduced raw material  purchase  costs and
 reduced waste disposal costs.

 The practice of discounting acknowledges that there are "opportunity costs" to using money. For
 example, when a printer chooses to invest in a solvent distillation system, the firm foregoes the
 opportunity to increase production capacity by purchasing a new press with that money. A firm
 usually has multiple investment opportunities, each with a different financial  benefit for the firm.
 In order to choose between the available investment opportunities, the firm should determine the
 rate of financial return that it expects from a typical investment,  and compare  the financial
 benefits of the specific projects at hand to that expected rate of return and also to each other.

 The expected rate of return for a typical investment is called the  firm's Discount Rate.  The
 Discount Rate, expressed as a percentage, is used to "discount" dollars received by the firm in
 future years as a result of an investment in Year zero, i.e., the Discount Rate is used to account
 for the time value of money as money that a firm invests now brings returns in the future.

 The Discount Rate of a firm should approximate the average financial  return expected on a
 typical investment made by that firm. As such, the chosen Discount Rate should,  at minimum,
 ensure that the firm recovers its "cost of capital", i.e., the financial return from an investment
 should at least cover the cost of the money required for the investment. For example, the money
 used for an equipment purchase might come from "equity capital" (e.g., stock funds,  on which
 the firm will have to pay dividends) or it might come from "debt capital", (e.g., a loan from a
 bank, on which the firm will have to pay interest).  The financial return on an investment should
 at least recover the cost of these investment funds.

 Instead of detailing  the  source  and cost of available investment capital for every individual
 investment project, firms typically use a weighted average cost of capital for the firm as a whole,
 a measure that characterizes the balance between the firm's use of equity capital and debt capital
 (including the tax effects of using debt capital) over a longer period of time.  This "weighted
 average cost of capital"  is often used as the firm's Discount Rate.  The use of the  weighted
 average cost of capital  as the firm's Discount Rate  for the financial analysis of investment
 opportunities allows the firm to select the investment opportunities that are profitable enough, at
 minimum, to cover  the  firm's average money costs, and hopefully reap a profit above  that
minimum.

The value of your company's Discount Rate also depends on the approach to financial analysis
you have  chosen: the real approach vs. the nominal approach.  As discussed previously, if you
have not included  an Inflation Rate in your financial analysis, then you should not incorporate
inflation in your Discount Rate, i.e., you should use a real Discount Rate.  Alternatively, if you
have included an Inflation Rate  in your financial analysis, make sure that your Discount Rate
also incorporates inflation, i.e., use a nominal Discount Rate. The relationship between the two
types of Discount Rate is shown below:
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                                               (R*I)
                     where:
                           N = Nominal Discount Rate
                           R = Real Discount Rate
                           I = Inflation Rate
The typical real Discount Rate for a stable business ranges from 8% to 20%.  Because a, Discount
Rate is based on your cost of capital, it incorporates financing parameters (e.g., interest and
principal) in  the  analysis, avoiding the  need to directly  include  them  in  the cash flow
calculations.

The Discount Rate is one way  to measure the risk associated with an investment.2 If the risk
associated with a proposed investment differs from the risk of investments generally made by the
firm, the Discount Rate should be adjusted accordingly.  Increase the Discount Rate for those
investments that are riskier than average; decrease the Discount Rate for those investments that
are less risky than average.  The amount to vary the Discount Rate to account for risk is often a
product of intuition rather than quantitative analysis.

Define a Discount Rate for the project on the Default Parameters sheet. P2/FINANCE applies
this value to  the Incremental Cash Flow Analysis (i.e.,  the comparison of each Alternative
Scenario with the Base Scenario) and, thus, the Discount Rate is the same for all scenarios within
a project. P2/FINANCE uses the Discount Rate to calculate the Discounted Cash Flow on the
Incremental Cash Flow Analysis sheet. The Discounted Cash Flow is then used to calculate Net
Present Value and Discounted Payback  on the Incremental  Profitability Analysis sheet. (Net
Present Value and Discounted Payback are described later in the Guide on pages 3-12 through 3-
14.)

Income Tax Rates

Taxes can play a major role in the profitability  of any project and are calculated at a company-
wide level. Define the Local, State, and Federal Income Tax Rates for the project by entering the
appropriate percentages in the yellow fields on  the Default Parameters sheet.  Because you  can
deduct your state and local taxes from your federal taxable income, P2/FINANCE calculates an
Aggregate Income Tax Rate using the formula:
3 Generally, it is preferable to directly quantify the risk or uncertainty associated with an investment. For example,
include an estimate of the legal liability related to an investment directly in the analysis, instead of adjusting the
Discount Rate for this risk.
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             where:
                           A = [F * (1 - S - L)] + S + L
                    A =   Aggregate Income Tax Rate
                    F =    Federal Income Tax Rate
                    S =    State Income Tax Rate
                    L =    Local Income Tax Rate
P2/FINANCE applies this aggregate value to the Incremental  Cash Flow Analysis  (i.e.,  the
comparison of each Alternative  Scenario  with the Base  Scenario) and, thus, the Aggregate
Income Tax Rate is the same for all scenarios within a project.

When defining your Income Tax Rates, consider whether the proposed investment would change
your current tax rates. For example, if the investment would result in an increase in production
with a corresponding increase in revenues, the firm might jump to a higher tax bracket.

Note:  P2/FINANCE does not explicitly  include capital gains taxation or investment tax
credits.  These tax impacts, where applicable, can be entered into the software as Annual
Operating Costs/savings.
Depreciation

The Internal Revenue Service (IRS) permits firms to shield some of their taxable income through
tax depreciation of the Initial Investment Costs.  Depreciation is the gradual deduction of the
equipment  costs  over time.   IRS  specifies  the  method  and time period to calculate the
depreciation for a piece of equipment. The remaining value of the equipment in each year (Initial
Investment Cost -  cumulative depreciation) is the Remaining  Book Value of the equipment.

The  calculation of depreciation does not take into  account the time value of money.  For
example, suppose  you purchase a new dry cleaning machine  for $35,000 and depreciate it over 7
years.  Using the standard IRS Depreciation Method—double declining balance switching to
straight line with a half-year convention  (DDE)—and applying  a Discount Rate  of 10%
(assuming 0% Inflation Rate) would over time generate a tax shield of $26,075 in Year 0 dollars.
Because  depreciation does not account for the time  value  of money, firms benefit from
depreciating equipment as quickly as possible.  The IRS defines two accelerated schedules for
this purpose.

Although the IRS requires you to depreciate  equipment costs over tune, firms may directly
expense (i.e., fully deduct from taxes) some  non-equipment costs (e.g., Site Preparation, Start-up
Training) associated with the initial investment.  You  cannot  depreciate or expense  Working
Capital Costs (e.g., inventory expenses) because they  do not represent real cash expenses; these
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 costs are recovered  at the end of the Lifetime of the project.   (For  further information on
 Working Capital, see pages 2-20 and 2-21). P2/FINANCE allows you to select "Depreciation"
 Methods for both Expensed Initial  Investment Costs and Working Capital Initial Investment
 Costs.

 Note:  This Guide provides general information on how to estimate the depreciation impact
 of a potential project.  However, when filing your taxes, check with an accountant or the
 IRS to ensure the use of an appropriate depreciation method and period.

 On the Default Parameters sheet, select a default Depreciation Method and default Depreciation
 Period to use as a starting point for the analysis. To define a default Depreciation Method, enter
 one of the depreciation codes listed on the Default Parameters sheet and below.  Similarly, to
 define the number of years over which the equipment is depreciated,  enter a number in the
 yellow field labeled default Depreciation Period.

 P2/FINANCE allows you to  define depreciation parameters at two  different levels in the
 software:

       1.     On the Default Parameters sheet as a Global Parameter for the project; and

       2.     On the Initial Investment Costs sheet for each cost category to override the default
              Depreciation Method  and default Depreciation Period for costs in that particular
              category.
Depreciation Methods

P2/FINANCE allows the user to select a Depreciation Method for each Initial Investment Cost
category from several choices:

       4  SL (Straight Line) - The depreciation amount  is constant  over the Depreciation
          Period.

       +  DDE (200% Declining Balance switching to Straight Line) - An accelerated schedule
          in which the equipment is depreciated at a higher rate in the beginning of its Lifetime.

       *  1.5DB (150% Declining Balance switching to Straight Line) - Another accelerated
          schedule at a lower rate.

P2/FINANCE automatically applies a half-year convention to all depreciation calculations (i.e.,
SL, DDB, 1.5DB).  .Not knowing when in a year the equipment is purchased (or  placed into
service), this IRS convention allows firms to deduct only a half year's value of depreciation in
the first year  the  equipment was  placed  into service.   To recapture  the lost half year  of
depreciation,  the  IRS  extends the  Depreciation Period  by  a  half  year.    For  example,
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P2/FINANCE depreciates equipment with a Depreciation Period of five years over six years with
a half year's depreciation taken in the first and sixth years.

If depreciation is not relevant to a particular cost category, P2/FINANCE also allows the user to
select from two non-Depreciation Methods:

       4  EXP (Expensed (tax deductible in the first year)) - These non-equipment costs are
          fully deducted from the cash flow as operating expenses hi the year following the
          Investment Year.

       4  WC  (Working  Capital (not tax deductible))  - Working Capital Costs  are neither
        .  depreciated or expensed.  Working Capital Costs are returned to the cash flow at the
          end of the project's Lifetime.  Marking a category as  "WC" informs P2/FINANCE
          that these  costs need to be added back to the cash  flow at the  end of the cost
          category's Lifetime. (For further information on Working Capital, see pages 2-20 and
          2-21).

DDE is the most commonly used Depreciation Method because it allows the  firm to deduct a
higher percentage of the Initial Investment Cost early in the Depreciation Period.
Depreciation Period

The IRS  has developed regulations  on Depreciation Periods  allowed for different types of
property.  In general, the following Depreciation Periods listed in Table 3 apply.

                     Table 3. Depreciation Period by Property Type3
Property
                         Period
Small tools                                                               3 years
Automobiles, office machinery, computers, and property used for research    5 years
  and experimentation
Office equipment and most manufacturing equipment                        7 years
Machinery and equipment used for petroleum distilling and  refining, and
  for milling grain                                                        10 years
Sewage treatment plants, telephone and electrical distribution facilities, and
  land improvements         '.                                             15 years
Service stations and other property with a useful life of less than 27.5 years     20 years
Residential, rental property                                                27.5 years
Buildings and real estate placed into service before 5/13/1993.                31.5 years
Buildings and real estate placed into service after 5/12/1993.	39 years
3 Ray H. Garrison, D.B.A., CPA and Eric W. Noreen, Ph.D., CMA, Managerial Accounting, 7th ed: (Burr Ridge,
IL: Irwin, 1994), p. 718.
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 Scenario Parameters

 Other Default Parameters are defined for each individual scenario. On the Default Parameters
 sheet, you define the Name, the default Investment Year, and  the default Lifetime for the
 scenario. P2/FINANCE automatically defines the default Start Year and default End Year for the
 scenario.
Name
Define a Name for the scenario here.  P2/FINANCE then copies this Name to all sheets for the
scenario.
Investment Year

P2/FINANCE allows you to specify a default Investment Year for each scenario. Simply enter a
number in the yellow field for each scenario.  You later can tailor the Investment Year for
individual Initial Investment Cost categories. Year 0 is the most common Investment Year. It is
possible to analyze multi-year investments for which you would purchase some equipment at the
end of Year 0 and then more equipment at the end of Year 2.  For such an investment, enter 0 as
the default Investment Year.  Then, on the Initial Investment Costs sheet, create two equipment
cost categories—Purchased Equipment:   Year  0  and Purchased Equipment:  Year 2.
Specify an Investment Year of 2 for the latter equipment cost category.

From the default Investment Year, P2/FINANCE identifies the default Start Year for the Annual
Operating Costs  as the following year.  This relationship between Initial Investment Costs and
Annual  Operating  Costs  stems from  financial  analysis convention, which assumes that
investments occur at the end of the year (e.g., December 31, 1995) and that depreciation and
other tax impacts as well as operating costs do not start until the beginning of the following year
(e.g., January 1, 1996).  For example, if you purchased a paint spray booth in year 0, you would
not begin accounting for  Annual  Operating Costs, revenues, and  tax implications (such  as
depreciation) until year 1 when you would have a full year of operation. This convention ensures
that each year (after Year 0) reflects a full year of costs due to the investment.
Lifetime

P2/FINANCE allows you to define a default Lifetime for each scenario.  Simply enter a Lifetime
value in the labeled yellow field for each scenario. Lifetime affects the Initial Investment Costs
in two ways.  First, it defines when the equipment is salvaged (i.e., sold) so that P2/FINANCE
can include the revenue from the sale as well as related taxes in the analysis. Second, Lifetime
defines when Working Capital is no longer needed for the project and is available for other uses.
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P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
The return of Working Capital appears as a revenue in the analysis because the investment can,
in essence, sell the  Working Capital to another investment.  You later can tailor the default
Lifetime for individual Initial Investment Cost categories.

In addition to these two uses, P2/FINANCE uses the default Lifetime to define the default End
Year for the Annual Operating Costs.   You later can tailor  this  default End Year value for
individual Annual Operating Cost categories.
Start Year

P2/FINANCE automatically defines the default Start Year for the Annual Operating Costs as the
year after the default Investment Year. According to financial  analysis convention, Initial
Investment Costs occur at the end of the year and Annual Operating Costs begin in the following
year.   For example, if you define  Year 3 as the default Investment Year, P2/FINANCE
automatically defines Year 4 as the default Start Year for Annual Operating Costs.  You later can
modify this default Start Year on the Annual Operating Costs sheet for each cost category.
End Year

P2/FINANCE automatically defines the default End Year for the Annual Operating Costs by
adding the Lifetime to the Investment Year.  For example, if you define Year 2 as the default
Investment Year and 10 as the Lifetime of the investment, P2/FINANCE automatically defines
Year 12 as the  default End Year for the Annual Operating Costs. You later  can modify this
default End Year on the Annual Operating Costs sheet for each cost category.
Accessing Scenarios

The Default Parameters sheet does not contain different sections for each scenario.  Therefore,
Alt+C does not function within this  sheet.   When you select Alt+C, the menu of different
scenarios appears at the top of the screen, but the selection of a scenario does not change your
location in the sheet.
 Printing Scenarios

 To print the Default Parameters sheet, select Alt+P to access the general print menu at the top of
 the screen. From this menu, choose Default with the cursor or type the letter D.
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P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
Accessing Help

To access the on-line help screen for the Default Parameters sheet, select Alt+H from anywhere
within the sheet This help screen defines each of the financial parameters listed on the Default
Parameters sheet. To exit the help screen, select the HOME key to return to the top of this sheet
or Alt+G to move to a different sheet.
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P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
Initial  Investment Costs  Sheet

Once you define both the Global and  Scenario  Parameters for the project on  the Default
Parameters sheet, you can begin entering cost data related to the initial investment. In many
cases,  only  Alternative Scenarios, i.e.,  changes to  your current  process, require  an  initial
investment.  For these cases, enter the Initial Investment Costs under an Alternative Scenario. In
cases where the Base Scenario, or business-as-usual activities, also requires an investment, enter
Initial Investment Costs in both Alternative and Base Scenarios.  For example, a dry cleaning
shop may face a regulation that requires it to add pollution control devices to their dry cleaning
machines to meet air emission limits.  The shop,  however, considers transferring some of its
capacity  from dry cleaning to wet cleaning, enabling it to meet air emission limits without
pollution control devices.  To assess the profitability of such an operating change, the shop
would enter the Initial Investment Costs needed to transfer some of its capacity to wet cleaning in
Alternative Scenario 1  and input the Initial Investment Costs related to the pollution control
devices in the Base Scenario.  P2/FINANCE  allows you to define Initial Investment Costs for
any scenario—Alternative or Base.

First, identify the costs required to start up the investment by developing a cost inventory related
to the initial  investment.   Total Cost Assessment  (TCA) expands  the definition of  Initial
Investment Costs to include a wider range of costs than typically  considered in conventional
financial  methods.  An example of this broader view is P2/FINANCE's use of the term "Initial
Investment Costs" as a replacement for "capital costs."  The term capital cost generally refers
only to equipment and other direct material cost items, i.e., those that are depreciable, and thus
omits indirect and non-depreciable costs.  Indirect costs related to  the initial investment, such as
labor associated with planning, engineering,  and training, can impact the profitability  of the
investment and thus merit inclusion in the analysis. Keep these other Initial Investment Costs in
mind and, where feasible, include them in your analysis to enhance its accuracy.

Financial analysis estimates the profitability of an investment and as an estimate, is not sensitive
to the precise timing of Initial  Investment Costs and Annual Operating Costs within a calendar
year.  Instead, financial analysis convention assumes that Initial Investment Costs  occur at the
end of the year (e.g., December 31, 1995) and that depreciation and other tax impacts as well as
Annual Operating Costs do not start until the beginning of the following year (e.g., January 1,
1996). For  example, if you purchase a rotary tiller at the end of Year 4, you would not begin
accounting for Annual Operating Costs, revenues, and tax implications (e.g., depreciation) until
Year 5 when you would have a full year of operation.  This convention ensures that each year
(after Year 0) reflects a full year of cost impacts due to the investment.  As a result rf this timing
convention,  the default Start Year for Annual Operating Costs always is the year following the
default Investment Year.

The first  step on the Initial Investment Costs sheet is to define the relevant cost categories for the
project.  Cost  categories serve two purposes  in P2/FINANCE.  First,  they  are  used  in the
Scenario  Summary, Tax Deduction Schedule, and Incremental Cash Flow Analysis  sheets for
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 P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
tracking and organizing cost data.  Second, cost categories are used to indicate a set of financial
parameters (e.g., Depreciation Method) that differ from the Default Parameters. You can use the
cost categories to organize these modifications.  For example, an auto manufacturer depreciates
most equipment over seven years with the exception of small and special tools that  depreciate
over three years. To accommodate both Depreciation Periods in a single scenario, define two
purchased equipment categories—one with a 7 year Depreciation Period, titled Purchased
Equipment - 7 Years  and the other with a 3 year Depreciation Period, titled Purchased
Equipment - 3 Years.

Within a project, the names of Initial Investment Cost categories must remain consistent from
scenario to scenario because P2/FINANCE tracks costs in the Scenario Summary, Tax  Deduction
Schedule, and Incremental Cash Flow Analysis sheets by cost category.  Therefore, you can
modify the names of cost categories only in Alternative Scenario 1; P2/FINANCE automatically
adjusts the names of cost categories in other scenarios to reflect changes made in Alternative
Scenario 1.

Having defined the cost categories, enter the relevant cost item names within each cost category.
Because the cost items are not used for reporting purposes by the program, they can  vary from
scenario to scenario.  P2/FINANCE inflates Initial Investment Costs that do not occur  in Year 0,
using the global Inflation Rate and the Investment Year defined for that cost category.

Note:  For each cost item,  always enter  the Initial Investment  Cost in Year  0  dollars
regardless of the year in which the cost occurs.  In P2/FINANCE, enter costs as positive
values and revenues as negative values.  The only exception  to this sign convention is
Salvage Value, a revenue that is entered in the Salvage Value field as a positive value.

P2/FINANCE monitors the parameters defined for each cost category and gives an error message
(P2F #ERR)  in the TOTAL field for  a cost category when the defined combination  of
parameters is  not allowed.  For example, the choice of DDE  as the Depreciation Method with a
Depreciation Period of 0 yields P2F #ERR. Several rules govern parameters defined at the
category level.

      •   With a Depreciation Method of DDE, 1.5DB, or SL, the Depreciation Period must be
          greater than 0.
      •   The Depreciation Period can never be less than 0 or text.
      •   The Depreciation Method must be one of the five P2/FINANCE codes.
      •   The Investment Year can never be less than 0 or text.
      •   The Investment Year can never by greater than 15.
      •   The Lifetime can never be less than 1 or text.
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P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
Salvage Value

If your investment has resale potential at the end of its Lifetime, include its Salvage Value (in
Year 0 dollars) on the Initial Investment  Costs sheet.  In the cost category where you have
defined the equipment cost, enter its resale  value in the yellow Salvage Value field as a positive
value.

Note: Salvage Value is the only revenue you enter as a positive value in P2/FINANCE.

P2/FINANCE inflates the Salvage Value and includes it on the Incremental Cash Flow Analysis
sheet as a revenue in the Lifetime year  (i.e., Investment Year +  Lifetime).  For example, you
purchase a printing press in Year 0 for $500,000 and believe that you can sell it at the end of its
10 year Lifetime for $50,000 (in Year 0  dollars), assuming an annual Inflation Rate of 5%.- In
Year 10, P2/FINANCE  inflates the Salvage  Value to $81,445  and includes this  value as a
revenue related to the investment.

In addition to its revenue-generating potential, Salvage Value also impacts the taxes related to an
investment.  Because IRS depreciation equations do  not account for Salvage Value, any revenue
received from the resale of fully depreciated equipment is taxable.  If the equipment is  sold
before it has been fully depreciated, the Taxable Gain (Loss) on Salvaged Equipment depends on
the  difference between the inflated Salvage Value  of the equipment and  its Remaining Book
Value at the end of its Lifetime. If the salvaged equipment is sold for less than its Book Value
(i.e., Salvage Value  < Book Value), you  can reduce your taxable income by the difference
between the two values.  Similarly, if the  salvaged equipment is sold for more than its Book
Value (i.e.,  Salvage  Value > Book Value), you have to pay taxes on the difference.  This
difference (i.e., Salvage Value - Book Value) is included in the Tax Calculation on both the Tax
Deduction Schedule and Incremental Cash Flow Analysis sheets.  Because  it is unlikely that the
Salvage Value of a piece of equipment would exceed its original  purchase price, P2/FINANCE
does not consider capital gains taxation.
Tailoring the Financial Parameters

For each Initial Investment Cost category, you can change the following Default Parameters to
more accurately reflect the profitability of an investment:  Investment Year, Lifetime, default
Depreciation Method, and default Depreciation Period. Organize cost items that require the same
financial parameters into corresponding cost categories.  For example, you are evaluating a
multi-year investment in which the majority of Initial Investment Costs occur in Year 0 with the
exception of some related equipment costs that will not occur until Year 2. To evaluate such an
investment, separate the costs first by Investment Year. Then within each of these sets, separate
all  of the costs by Depreciation  Method.   Continue  this approach with the Lifetime and
Depreciation Period parameters until you have groups of cost items that share the same financial
parameters.  P2/FINANCE only uses Lifetime to determine when to cash in Salvage Value and
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 P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
 Working Capital.  If neither of these are relevant for the cost items within a particular cost
 category, you do not have to make sure that all cost items share the same Lifetime.

 One example of a situation in which you would want to tailor the Default Parameters for an
 individual cost category is when you have Initial Investment Costs that can be directly expensed.
 Some Initial Investment Costs do not have to be depreciated, such as Site Preparation arid Start-
 up Training. P2/FINANCE  allows you to select a "Depreciation" Method, EXP, for Initial
 Investment Costs that should be fully  deducted from  the  cash flow as operating expenses.
 Because P2/FINANCE adopts the financial analysis convention that investments occur at the end
 of the year (e.g., December 31), it does not expense these Initial Investment Costs until the year
 following the Investment Year.  For  example,  if you incur an  expensed  cost in Year 2,
 P2/F1NANCE does not expense it for tax purposes until Year 3.  When you select the EXP
 method, P2/FINANCE ignores Salvage Value entries because only equipment can be salvaged.
 P2/FINANCE also ignores the Depreciation Period when you select EXP.
 Working Capital

You also may need to tailor the Default Parameters for Initial Investment Cost categories that
denote Working  Capital.   When beginning a  new process,  developing  a new product, or
increasing production capacity,  your firm may need to temporarily set aside funds for project
start-up.  These temporary investments  can be  recovered by the company at the end of the
Project's Lifetime. During the project, though, these investments are "tied up" in the project and
are not available for other investments; however, the time value of money must be accounted for
through the application of an Inflation Rate and a Discount Rate.  An investment in inventories is
a common Working Capital Initial Investment Cost that is relevant for the financial analysis of a
project. For example, it may be necessary to purchase $3000 worth of inventory in substrates
and inks when you bring a new press on-line at the end of Year 0, knowing that you can recover
these costs by selling the inventory at the end of the project's Lifetime.  In this example, you
would incur a cost at the end of Year 0 (included on the Initial Investment Costs sheet) and see a
revenue (i.e., a release of the tied-up funds) at the end of the  project's Lifetime included as
Recovery of Working Capital on the Incremental Cash Flow Analysis sheet. Because Working
Capital is recovered by the company, it cannot be depreciated or expensed.

Working Capital  on a facility-wide basis includes the amount  of capital tied up in accounts
receivable, accounts payable, taxes payable, inventory and cash  requirements.  For a particular
project, Working  Capital can be estimated as a percentage of the expected change in revenues
due to the project.  If the  company's operations are stable and the proposed project is not
expected to have a significant impact on the company's revenues, these other Working Capital
impacts are typically minimal and can be omitted from the analysis. If developing  an inventory,
on the other hand, is directly linked to the proposed project, its costs should be included in the
analysis as Working Capital.
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P2/FI3SA1SCE Version 3.0
                     Step by Step Instructions: Entering Data
To include  a Working Capital Initial  Investment  Cost in a scenario,  enter WC as  the
Depreciation Method for an Initial Investment Cost category.  The WC code tells P2/FINANCE
how to treat the Initial Investment Costs within that category.  P2/FINANCE does not depreciate
or expense WC cost categories and it returns the inflated value of the Working Capital to the
cash flow as a revenue in the Lifetime year (i.e., Investment Year + Lifetime) for that category.
If you  select WC as the Depreciation Method for  an Initial  Investment  Cost category,
P2/FINANCE ignores Salvage Value and the Depreciation Period.
Accessing Scenarios

The Initial Investment Costs sheet contains three sections, one for each scenario—Alternative 1,
Alternative 2, and Base.  To move among these scenarios, select Alt+C to access a menu at the
top of the screen. P2/FINANCE gives you the following options:

       •  1         Alternative Scenario 1
       •  2         Alternative Scenario 2
       •  Base      Base Scenario

From this menu, choose the desired scenario with the cursor or type its first number or letter. For
example, to access the Alternative Scenario 2, type:

                                 Alt+C
                                 2

Alt+C allows you to move between scenarios, differing from Alt+G, which allows you to move
between sheets within a.scenario.
Printing Scenarios

To print a section of the Initial Investment Costs sheet, select Alt+P to access the general print
menu at the top of the screen. From this menu, choose Investment with the cursor or type the
letter I to access a second  menu from which you  can choose the scenario(s) to print.
P2/FINANCE gives you the following options:
          1
          2
          Base
          All
Alternative Scenario 1
Alternative Scenario 2
Base Scenario
All Scenarios
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P2/FINANCE Version 3.0
Step by Step Instructions:  Entering Data
Accessing Help

To access the on-line help screen for the  Initial  Investment Costs sheet,  select Alt+H from
anywhere within the sheet  This help screen defines each of the components of the Initial
Investment Costs sheet.  To exit the help screen, select Alt+C to return to a  scenario within this
sheet or Alt+G to move to a different sheet.
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P2/FIN ANCE Version 3.0
Step by Step Instructions: Entering Data
Annual Operating Costs Sheet

In a financial  analysis, the Initial Investment Costs are weighed against the expected Annual
Operating Costs (i.e.,  the annual operating revenues  or cost savings) associated with the
investment.  Enter the Annual Operating Costs associated with the investment in the Alternative
Scenario and costs  for business-as-usual operations in the Base Scenario.  In general, only
include in the financial analysis those costs that are likely to change as a result of the investment.
For example, if you do not expect labor costs to change with the purchase of a new paint gun
cleaner, then omit the cost of labor from the analysis.

Financial analysis convention assumes that all Initial Investment Costs occur at the end of the
year (e.g., December 31, 1995) and that depreciation and operating costs do not start until the
beginning of the following year (e.g., January  1, 1996).  Thus,  P2/FINANCE automatically
defines the default Start Year for Annual Operating Costs as the year following the default
Investment Year.  You can modify this Start  Year  for  individual Annual Operating Cost
categories as needed.

As on the Initial Investment Costs sheet, the first step on the Annual Operating Costs sheet is to
define  the relevant  cost categories for the  project.  Cost categories serve two  purposes in
P2/FINANCE.  First, they are used  on the Scenario Summary, Tax Deduction Schedule, and
Incremental  Cash Flow Analysis sheets for  tracking and organizing cost data.  Second, cost
categories are used to indicate  a set of financial  parameters that differ from  the Default
Parameters.  You can Use the cost categories to organize these modifications.  The financial
parameters that you can modify  for Annual Operating Cost categories include Start Year, End
Year, and Escalation Rate.

Within a project, the names of the  cost categories must remain consistent from scenario to
scenario because P2/FINANCE tracks costs on the Scenario Summary, Tax Deduction Schedule,
and Incremental Cash Flow Analysis sheets by cost category. Therefore, you can later modify
the names of cost categories only in Alternative Scenario 1; P2/FINANCE automatically adjusts
the names of cost categories in other scenarios to reflect changes made in Alternative Scenario 1.

After defining the cost categories, enter the relevant cost item names within each cost category.
Because the  cost item names are  not used for reporting purposes, they can vary from scenario to
scenario. P2/FINANCE inflates the Annual Operating Costs, using the global Inflation Rate and
any Escalation Rate defined for the cost category.

Note:  For each cost item, always enter the cost in Year 0 dollars regardless of the year in
which  the cost occurs. In P2/FINANCE,  enter costs  as positive values and  revenues as
negative values.
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P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
P2FINANCE monitors the parameters defined for each cost category and gives an error message
(P2F #ERR) in the  TOTAL field for a cost category when  the  defined combination  of
parameters is not allowed. Several rules govern parameters defined at the category level.

       •  Text may not be entered into any of the parameter fields.
       •  Start Year and End Year must be greater than 0.
       •  Start Year must never be greater than 15.
       •  Start Year must never be greater than the End Year.
Escalation Rate

Because the global Inflation Rate represents an average increase in prices for all goods, it does
not  always capture the expected  change  in costs over  time  for particular  cost  items.
P2/FINANCE allows you to apply an additional Escalation Rate to an Annual Operating Cost
category.  Costs within a cost category are first inflated using the global Inflation Rate and then
escalated using the Escalation Rate specific to the cost category. Therefore, the Escalation Rate
for a specific category and the global Inflation Rate are additive.  For example, if you expect
Waste Disposal costs to  rise by 5% each year and have set the global Inflation Rate at 3.5%, set
the Waste Disposal Escalation Rate to 1.5%.  Enter an Escalation Rate in the yellow Escalation
Rate field below the cost category name as a decimal number. To enter an Escalation Rate of
5%, type 0.05 or 5%.

Note: P2/FINANCE allows you to define both negative and positive Escalation Rates.
Tailoring the Financial Parameters

For each Annual Operating Cost category, you can change the following Default Parameters to
more accurately reflect the profitability of an investment:  Start Year, End Year, and Escalation.
Organize cost items that require the same financial parameters into cost categories.  For example,
suppose you are considering a multi-year investment where some Annual Operating Costs occur
from Year 1 to Year 5, while another set of Annual Operating Costs occur from Year 6 to Year
10. To organize the costs by financial parameters they share, separate the costs first by the years
over which they will occur (i.e., Year 1 to 5 and Year 6 to 10). Then, within each of these sets,
organize the costs by Escalation Rate until each group of cost items shares the same financial
parameters. The ability to tailor the financial parameters allows you to include Annual  Operating
Costs that do not occur on an annual basis. For example, suppose you want to include a liability
cost of $50,000 (in Year 0 $) in Year 6 in the Base Scenario.  Create a Annual Operating Cost
category titled Liability, enter $50,000, and define the Start Year as 6 and the End Year as 6.
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 P2/FIN ANCE Version 3.0
                    Step by Step Instructions:  Entering Data
 Accessing Other Scenarios

 The Annual Operating Costs sheet contains three sections, one for each scenario—Alternative 1,
 Alternative 2, and Base. To move among these scenarios, select Alt+C to access a menu at the
 top of the screen. P2/FINANCE gives you the following options:

       •  1         Alternative Scenario 1
       •  2         Alternative Scenario 2
       •  Base      Base Scenario

 From this menu, choose the desired scenario with the cursor or type its first letter. For example,
 to access the Alternative Scenario 2, type:

                                 Alt+C
"'                                 1

 Alt+C allows you to move between scenarios, differing from Alt+G, which allows you to move
 between sheets within a scenario.
 Printing Scenarios

 To print a section of the Annual Operating Costs sheet, select Alt+P to access the general print
 menu at the top of the screen.  From this menu, choose Operating with the cursor or type the
 letter O to access  a  second menu from  which you  can choose  the scenario(s) to print.
 P2/FINANCE gives you the following options:
       •  1
       •  2
       •  Base
       •  All
Alternative Scenario 1
Alternative Scenario 2
Base Scenario
All Scenarios
 Accessing Help

 To access the on-line help screen for the Annual Operating Costs sheet, select Alt+H from
 anywhere within the sheet.  This help screen defines each of the components of the Annual
 Operating Costs sheet.  To exit the help screen, select Alt+C to return to a scenario within this
 sheet or Alt+G to move to a different sheet.
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3. Calculating the Bottom
           Line:
      Generating Reports

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P2/FITSANCE Version 3.0
Calculating the Bottom Line:  Generating Reports
After defining all of the elements of your scenario(s) (i.e., financial parameters and cost data),
you can generate four types of reports that are detailed below.

   1.  P2/FINANCE provides a Scenario  Summary with information on the cost data and
       parameters that you entered for the scenario.  It does not include any calculations and can
       be used as a way to check data entry accuracy.

   2.  P2/FINANCE provides a Tax Deduction Schedule that details depreciation calculations
       along with other tax deductions that are incorporated into the Incremental Cash Flow
       Analysis.

   3.  P2/FINANCE  provides  an  Incremental  Cash  Flow  Analysis  that compares  an
       Alternative Scenario to  the  Base  Scenario. It  incorporates inflation, depreciation,
       escalation, taxes, and discounting. This report contains a Tax Calculation and a Cash
       Flow Calculation,  the results of which P2/FINANCE uses to calculate the financial
       indicators listed on the Incremental Profitability Analysis sheet.

   4.  P2/FINANCE  provides  an Incremental Profitability Analysis  that  includes three
       financial indicators: Net Present Value, Internal Rate of Return, and Discounted Payback.
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P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
Scenario Summary  Report
The Scenario Summary depicts the scenario as it was defined by the user without performing any
of the calculations or inflating the values. It lists the parameters defined at the cost category
level as well as the Default Parameters for the  scenario.  A Scenario Summary exists for each
scenario—Alternative 1, Alternative!, and Base.

P2/FINANCE lists the name of the scenario in the top left corner and the Date at the middle top.
Each Scenario Summary Report contains four sections:

       •  Initial Investment Costs
       •  Annual Operating Costs
       •  Global Parameters
       •  Scenario Parameters

The Initial  Investment  Costs  section of the  Report lists information entered  on  the Initial
Investment Costs  sheet for the  scenario.  The names of the Initial Investment Cost categories
appear in the left column, followed by the sum of Initial Investment Costs for that category.
P2/FINANCE lists all costs hi Year 0 dollars  (i.e., uninflated dollars) on the Scenario Summary.
Next to the Cost for each cost category appears its Salvage Value (also in Year 0 dollars).  The
financial  parameters follow  with Investment  Year,  Lifetime,  Depreciation Period,  and
Depreciation Method defined for each cost category.   The Initial Investment  Costs section
provides a quick  check on the data and  financial parameters for the investment portion of a
scenario.

The Annual Operating Costs section of the Scenario Summary lists information entered on the
Annual  Operating Costs sheet  for the scenario.   The names  of the Annual  Operating  Cost
categories appear in the left column, followed by the sum of the Annual Operating Costs for that
category (in Year 0 dollars). The financial parameters follow with Start Year, End Year, and
Escalation Rate defined for each cost category.  The Annual Operating Costs section provides a
quick check on the data and financial parameters for the operating cost portion of a scenario.

The Global Parameters section lists  some of the Default Parameters defined on the Default
Parameters sheet.  These Global Parameters  affect all scenarios within a project and, with the
exception of default Depreciation Method and default Depreciation Period, cannot be tailored to
a particular scenario or cost category.  In the Global Parameters section, P2/FINANCE reports
the Project  Title, Inflation Rate, Discount  Rate, Aggregate Income Tax  Rate,  default
Depreciation Method, and default Depreciation Period.

The Scenario Parameters section lists the remaining Default Parameters defined on the Default
Parameters sheet, those  parameters that relate to  an  individual scenario.   In the Scenario
Parameters section, P2/FINANCE reports the default Investment Year, default Lifetime, default
Start Year, and default End Year.
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P2/FINANCE Version 3.0
           Calculating the Bottom Line: Generating Reports
Note:  The financial parameters defined for a specific cost category always override the
Default Parameters at either the global or scenario level.
Accessing Other Scenarios

The Scenario Summary sheet contains three "sections,  one for each scenario—Alternative  1,
Alternative 2, and Base. To move between these scenarios, select Alt+C to access a menu at the
top of the screen.  P2/FINANCE gives you the following options:

      •  1         Alternative Scenario 1
      •  2         Alternative Scenario 2
      •  Base     Base Scenario

From this menu, choose the desired scenario with the cursor or type its first letter.  For example,
to access the  Alternative Scenario 2, type:

                                Alt+C
                                2

Alt+C allows you to move between scenarios, differing from Alt+G, which allows you to move
between sheets within a scenario.
Printing Scenarios

To print a section of the Scenario Summary sheet, select Alt+P to access the general print menu
at the top of the screen. From this menu, choose Summary with the cursor or type the letter S to
access a second menu from which you can. choose the scenario(s) to print.  P2/FINANCE gives
you the following options:
          1
          2
          Base
          All
Alternative Scenario 1
Alternative Scenario 2
Base Scenario
All Scenarios
Accessing Help

To access the on-line help screen for the Scenario Summary sheet, select Alt+H from anywhere-
within the sheet.  This help screen defines each of the components of the Scenario Summary
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P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
sheet. To exit the help screen, select Alt+C to return to a scenario within this sheet or Alt+G to
move to a different sheet.
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P2/FINANCE Version 3.0
Calculating the Bottom Line:  Generating Reports
Tax Deduction Schedule

The  Tax Deduction Schedule describes in detail the depreciation and other  tax deduction
calculations for each scenario and serves as input into the Incremental Cash Flow Analysis sheet.
For each scenario, P2/FINANCE generates a Tax Deduction Schedule that reports the tax
deductions related to each cost category in every year, over a period of 15 years.

P2/FINANCE lists the Name of the scenario in the top left corner and the Date in the top right
corner.  Each Tax Deduction Schedule contains three sections:

       •  Cost Summary
       •  Deduction Detail
       •  Deduction Summary

The Cost Summary section of the Report classifies the Initial Investment Costs in each year into
three types based on the Depreciation Method defined in each cost category:

       •  Depreciable Initial Investment Costs
       •  Expensed Initial Investment Costs
       •  Working Capital Initial Investment Costs

The Depreciable Initial Investment Costs reported for each  year  equals the sum of all cost
categories with a Depreciation Method of SL, DDE, or 1.5DB.  The Expensed Initial Investment
Costs reported for each year  equals the sum of all cost categories with a "Depreciation" Method
of EXP.  The Working Capital Initial Investment Costs reported for each year equals the sum of
all cost categories with a "Depreciation" Method of WC.

Note: The Tax Deduction Schedule reports all costs in inflated and escalated dollars.

The Deduction Detail section of the Tax Deduction Schedule reports the annual tax deduction
for each cost category.  P2/FINANCE lists the cost category name in the left column with its
Depreciation Method in parenthesis.  Two rows of data appear for each  cost category.  The top
row of data lists the tax deduction allowed in that year through depreciation or expensing of the
initial cost.  The bottom row serves two functions; it reports the Initial  Investment Cost in the
Investment Year  and tracks the Remaining Book Value for that category after the depreciation
has been taken.

The Deduction Detail section appears differently for each cost classification:

       •   Depreciable Initial Investment Costs
       •   Expensed Initial Investment Costs
       •   Working Capital Initial Investment Costs
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For Depreciable Initial Investment Costs (i.e., those categories that have either SL, DDE, or
1.5DB for a Depreciation Method), P2/FINANCE reports the  Initial Investment Cost in the
bottom row in the Investment Year.  In the first year of depreciation (i.e., the year aifter the
Investment Year for the cost category), P2/FINANCE reports a half year of depreciation (based
on the selected Depreciation Method) hi the top row and subtracts that depreciation from the
Initial Investment Cost to calculate the Remaining Book Value, which it reports in the bottom
row.  After that first year of depreciation, P2/FINANCE calculates a full year of depreciation in
each year until the final year of depreciation (i.e., Investment Year + Depreciation Period + 1) in
which P2/FINANCE takes the remaining half year of depreciation.

Note:  IRS  requirements that firms take a half year of depreciation at the beginning and
end  of the depreciation  period extend the  depreciation  period  by one  year.   For an
investment at the end of Year 2 with a Depreciation Period of 5 years, depreciation actually
takes place over 6 years with half year's depreciation in years 3 and 8.

Depreciation calculations do not account for the Salvage Value of the equipment, i.e., resale at
the end of its useful life.  Therefore, the tax implications of Salvage Value must be calculated
separately. Any revenue received for the sale of depreciable assets above the Remaining Book
Value of that asset is taxable. Most often, you sell a piece of equipment after it has been fully
depreciated, in which case you must pay taxes on the revenue generated from this sale, i.e., the
inflated Salvage Value.  However, there may be  situations when you would want to sell the
equipment before it has been fully depreciated.  In such cases, P2/FINANCE takes only a half
year of depreciation in the Salvage Value year.  After salvaging the equipment, you can no
longer depreciate it.

To calculate the impact of Salvage Value on your taxable income, P2/FINANCE compares the
inflated Salvage Value  of the equipment with its Remaining Book Value in the Lifetime year
(i.e., Investment Year H- Lifetime). If you sell the equipment for more  than its Remaining Book
Value, the IRS requires you to pay taxes on the difference. However,  if you sell the equipment
for less than its  Remaining Book Value, the IRS  allows you to deduct a  tax loss from your
taxable income.  P2/FINANCE inflates the Salvage Value to the Lifetime year and calculates:
Salvage Value - Book Value = Taxable Gain (Loss) on Salvaged Equipment.

For Expensed Initial Investment Costs (i.e., those categories that list EXP as their Depreciation
Method), P2/FINANCE reports the inflated Initial Investment Cost in the bottom row of the
Investment Year column. In the following year, ,P2/FINANCE fully expenses the cost, reporting
the deduction in the top row, with no Remaining Book Value in the bottom row.

For Working Capital Initial Investment Costs (i.e., those categories that list  WC as their
Depreciation Method), P2/FINANCE reports the inflated Initial Investment Cost in the bottom
row of the Investment Year column.  Working Capital Initial Investment Costs can be neither
depreciated nor expensed because Working Capital refers only to an internal allocation of costs,
not a true cash flow.  Therefore, all other years report "NA" in the bottom row to indicate, that
tax deductions are not applicable.  Working  Capital costs return to the firm in the form of a
revenue at the end of the category's Lifetime, but, again, have no impact on taxes.
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The Deduction Summary section of the Tax Deductions Schedule summarizes the annual tax
deductions related to:

       •  Total Depreciation
       •  Expensed Initial Investment Costs
       •  Taxable Gain (Loss) on Salvaged Equipment

To calculate these first two values, P2/FINANCE simply adds the depreciation or expensing for
all of the cost categories.  P2/FINANCE calculates the Taxable Gain (Loss) by subtracting the
Remaining Book Value in the Lifetime year from the inflated Salvage Value. While depreciation
and  expensing lower  your  taxable  income,  the  Taxable Gain  increases it.   Therefore,
P2/FINANCE subtracts it from the other tax deductions to calculate the Total Tax Deductions in
each year.
Accessing Other Scenarios

The Tax Deduction Schedule sheet contains three sections, one for each scenario—Alternative 1,
Alternative 2, and Base.  To move among these scenarios, select Alt+C to access a menu at the
top of the screen. P2/FINANCE gives you the following options:

       •  1         Alternative Scenario 1
       •  2         Alternative Scenario 2
       •  Base      Base Scenario

From this menu, choose the desired scenario with the cursor or type its first letter.  For example,
to access the Alternative Scenario 2, type:

                                 Alt+C
                                 2

Alt+C allows you to move between scenarios, differing from Alt+G, which allows you to move
between sheets within scenarios.
 Printing Scenarios

 To print a section of the Tax Deduction Schedule sheet, select Alt+P to access the general print
 menu at the top of the screen. From this menu, choose Tax_Ded with the cursor or type the letter
 T to access a second menu from which you can choose the scenario(s) to print.  P2/FINANCE
 gives you the following options:
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          1
          2
          Base
          All
Alternative Scenario 1
Alternative Scenario 2
Base Scenario
All Scenarios
Accessing Help

To access the on-line help screen for the Tax Deduction Schedule sheet, select Alt+H from
anywhere  within the sheet.  This help screen defines  each of the components of the Tax
Deduction Schedule sheet.  To exit the help  screen, select Alt+C to return to a scenario within
this sheet or Alt+G to move to a different sheet.
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P2/FENANCE Version 3.0
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Incremental Cash Flow Analysis Sheet

The Incremental Cash Flow Analysis reports the incremental Discounted Cash Flow for each
Alternative Scenario as compared to the Base Scenario. Each Analysis incorporates the effects
of taxes, discounting, and  inflation on the project's cash flows and serves as the basis for
calculating the  profitability  indicators—Net  Present Value,  Internal Rate of Return, and
Discounted Payback (described on Pages 3-12 through 3-14 in this section).

P2/FINANCE lists the Name of the project in the top left corner and the Date in the top right
corner. Each Incremental Cash Flow Analysis presents data over fifteen years in four sections:

       •  Incremental Initial Investment Costs
       •  Incremental Annual Operating (Costs)/ Savings
       •  Incremental Tax Calculation
       •  Incremental Cash Flow Calculation

The Incremental Initial Investment Costs section summarizes the Initial Investment Costs for
the analysis. For  each cost category, P2/FINANCE inflates and reports the incremental Initial
Investment  Cost  hi  each year,  subtracting  the  Base Costs  from the Alternative  Costs.
P2/FINANCE calculates the Total Initial Investment Costs in each year by surnming all of the
cost categories.

The  Incremental  Annual Operating (Costs) / Savings section  summarizes the Annual
Operating (Costs)  / Savings for the analysis. For each cost category, P2/FINANCE inflates and
reports the incremental Annual Operating Costs hi each year, subtracting the Alternative Costs
from the Base Costs.  P2/FINANCE calculates the Total Annual Operating (Costs) / Savings in
each year by summing all of the cost categories.

Note:   P2/FINANCE calculates  the  Incremental Initial Investment Costs (Alt  -  Base)
differently than the Incremental Annual Operating (Costs) / Savings (Base - Alt)  because
the analysis weighs the initial costs due to the Alternative (Le., in this incremental section,
higher Alt costs are positive) against the operating savings due to that Alternative (i.e., in
this incremental section, higher Base costs are positive).

The Incremental Tax Calculation section incorporates depreciation and other tax deductions to
calculate the incremental taxes related to the Alternative Scenario.  The Tax Deduction Schedule
details the calculations for depreciation and other tax deductions that are summarized in this
section of the Incremental Cash Flow Analysis. To calculate the incremental taxable income for
the Alternative Scenario,  P2/FINANCE  subtracts both Depreciation  and  Expensed  Initial
Investment costs from the Annual  Operating (Costs) / Savings in each year and then  adds the
Taxable Gain (Loss) on Salvaged Equipment.  P2/FINANCE applies the Aggregate Income Tax
Rate  (defined  on the Default Parameters sheet) to the Taxable  Income  to calculate the
Incremental Income Tax for the Alternative Scenario as compared to the Base Scenario.
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 The Incremental Cash Flow Calculation section calculates the incremental Discounted Cash
 Flow using data from the top three sections of the analysis.  To calculate the After-Tax Cash
 Flow in a single year, P2/FINANCE subtracts both the Income Tax (from the Incremental Tax
 Calculation) and the Initial Investment Costs from the Annual Operating (Costs) / Savings for the
 Alternative Scenario. Two more costs are added into the cash flow at this point to calculate the
 After-Tax Cash Flow: Recovery of Working Capital and Salvage Value.

 Working Capital provides for accounts receivable, accounts payable, taxes payable, inventories
 and cash requirements associated with an investment.  Unlike the other costs  associated with a
 project, Working Capital does not reflect an actual project expense (i.e., one that is payable to  an
 external party). Instead, it is an internal allocation of funds. For this reason, at the end  of the
 investment's Lifetime the Working Capital is free for use in a different project. P2/FINANCE
 includes the Working Capital Initial Investment cost as part of the total Initial  Investment Costs
 for the investment. To account for the Recovery of Working Capital, P2/FINANCE includes the
 inflated Working Capital  as a one-time revenue at the end  of the Lifetime defined for the
 Working Capital cost category.  Because it  is only  an internal allocation  of funds,  Working
 Capital has no impact on the taxes calculated for the firm.

 Salvage Value equals the expected revenue from  the  resale  of equipment at the end of the
 equipment's lifetime. In the Initial Investment Costs sheet you can define a Salvage Value for
 each cost category. P2/FINANCE then includes the inflated revenue from the  Salvage Value in
 the Lifetime year for that category.

 Having calculated  the After-Tax  Cash  Flow,  P2/FINANCE calculates  the  incremental
 Cumulative Cash Flow for each year as the sum of annual incremental After-Tax Cash Flows to
 date.  P2/FINANCE also applies a Discount Rate to  the incremental After-Tax Cash Flow  to
 calculate the incremental Discounted Cash Flow hi each year. The incremental Discounted Cash
 Flow accounts for the  time  value  of money,  and  serves as the basis for calculating two  of
 P2/FINANCE's three profitability indicators.
Accessing Other Scenarios

The Incremental Cash Flow Analysis sheet contains two sections, one for each combination of
Alternative and Base Scenario. To move between these two sections, select Alt+C to access a
menu at the top of the screen. P2/FINANCE gives you the following options:

       •  1         Alternative Scenario 1
       •  2         Alternative Scenario 2
       •  Base      Base Scenario
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From this menu, choose the desired scenario with the cursor or type its first letter. For example,
to access the Alternative Scenario 2, type:

                                 Alt+C
                                 2

The Incremental Cash Flow sheet compares each Alternative Scenario with the Base Scenario;
this sheet does not contain  a separate section for the Base Scenario. If you select the Base
Scenario from the Alt+C menu, P2/FINANCE automatically goes to Alternative Scenario 1.

Alt+C allows you to move between scenarios, differing from Alt+G, which allows you to move
between sheets within a scenario.
Printing Scenarios
To print a section of the Incremental Cash Flow Analysis  sheet, select Alt+P to access the
general print menu at the top of the screen. From this menu, choose Cash_Flow with the cursor
or type the letter C to access a second menu from which you can choose the scenario(s) to print.
P2/FINANCE gives you the following options:
       •  1
       •  2
       •  All
Alternative Scenario 1 compared with the Base Scenario
Alternative Scenario 2 compared with the Base Scenario
Both Alternative Scenarios compared with the Base Scenario
Accessing Help

To access the on-line help screen for the Incremental Cash Flow Analysis sheet, select Alt+H
from anywhere within  the sheet.  This help screen defines each of the components of the
Incremental Cash  Flow Analysis  sheet.  To  exit the help screen, select Alt+C to return to a
scenario within this sheet or Alt+G to move to a different sheet.
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Incremental Profitability Analysis Sheet

The  Incremental Profitability Analysis sheet reports three common financial indicators that
measure the profitability of the analysis.  This information helps firms make well-informed
decisions as to how to re-invest in their business or modify current practices to reduce costs or
increase revenues.

One  of the important components of Total Cost Assessment  (TCA) is the use of multiple
financial indicators in measuring profitability. P2/FINANCE offers three indicators: Net Present
Value, Internal Rate  of Return, and Discounted Payback.  Each  indicator has specific strengths
and weaknesses. By  considering all three indicators you can minimize these limitations and gain
a deeper understanding of the project's profitability.
Net Present Value (NPV)

Net Present Value (NPV) over a given period of time equals the sum of the Discounted Cash
Flows and requires a firm's Discount Rate for calculation. A project is profitable if its NPV is
greater than zero.  For example, suppose you invest hi a digital paint mixing system costing
$5,000. In Year 0 your Discounted Cash Flow (DCF) equals -$5,000 and in all subsequent years
the imaging system generates a DCF of $2,000. The project's NPV in year 3 equals the sum of
the DCFs hi each year (i.e., Years 0'through 3; hence, -$5,000 + $2,000 + $2,000 +$2,000) or
Sl,000. If multiple projects are under consideration, the one with the most positive NPV is  the
most profitable.

P2/FINANCE calculates NPV for 5,10, and 15 year horizons, plus a time horizon you specify at
the top of the Incremental Profitability Analysis sheet.

NPV is a very useful indicator because it is a direct measure of the project's profitability in
dollars and therefore most directly relates to the company's interest in higher cash flows. It does,
however, depend significantly on  the value of the Discount Rate.  In general,  NPV  is  the
strongest of the  three indicators because it has  few limitations and can be used in all types of
analyses.
Internal Rate of Return  (IRR)

Internal Rate of Return (IRR) is equal to the Discount Rate that makes the Net Present Value
(NPV) of the Discounted Cash Flows equal to zero for a given time period of interest. IRR is
calculated via an iterative process (i.e., the software chooses Discount Rates until it finds one that
makes the NPV equal to zero). You can compare the IRR to your company's Discount Rate or
to the IRR calculated for other projects. If the IRR is higher than the company's Discount Rate,
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 then the project is profitable.  When comparing multiple investments, the one with the highest
 IRR is the most profitable.

 IRR is a useful indicator because it is easy to interpret and considers equally all of the cash flows
 of the investment.  P2/FINANCE calculates IRR for 5, 10, and 15 year horizons, plus a time
 horizon you specify at the top of the Incremental Profitability Analysis sheet.

 Despite these benefits,  IRR does have its limitations.  For example, if you are performing a
 complex analysis (e.g., capital costs in multiple years or widely fluctuating operating costs and
 revenues), you should  avoid using  this indicator.  To avoid confusion  with this indicator,
 P2/FINANCE does not calculate IRR for extremely complex analyses, instead reporting NA.
 (IRR will not be calculated if there is more than one change in the mathematical  sign of the cash
 flow, which would allow for multiple IRR values).

 In addition, IRR can  be misleading because it does not directly measure the magnitude of the
 cash flow or investment but instead measures the  return on the investment.  Suppose you are
 considering two investments:  Investment A requires an initial outlay of $50,000 and Investment
 B requires only $500. Even if Investment B has a higher IRR than Investment A, this does not
 necessarily indicate that B is  more profitable for the company.  In fact, B can have an IRR  of
 173% and A an IRR of 85% over the first five years, but A would generate more than four times
 as much revenue. Therefore, when you are comparing investments  with significantly different
 magnitudes of costs and revenues, you should use NPV because  it  is a direct  measure of the
 dollars the investment will generate.


 Discounted Payback

 Discounted Payback is one of several types of payback calculations, which,  in general, measure
 the time it takes for a  company to break even on an investment.  Payback calculations typically
 do  not incorporate the  time  value of money through discounting. However,  P2/FINANCE
 calculates Discounted  Payback, a method that includes inflation, escalation, and discounting.  A
 project's  Discounted Payback equals the time when the Net Present Value of the investment
 equals zero, i.e., when you have recovered your investment costs.

 Many companies base  their investment decisions on payback because it is easy to  understand and
 use. Knowing that payback for a ozonation system is 4 years while payback for a conventional
 cleaning system is 6 years can help guide decision-making. However, you should be aware of
 certain limitations of this indicator before using it.

 One limitation is that payback does not account for all of the cash flows of a project. It considers
the cash flows that take place before the investment is paid back, but ignores all cash flows after
this threshold. Ignoring these  later cash flows can mislead you as to the true profitability of the
investment.
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As an example, suppose you are considering two investments, A and B, and each requires an
initial investment of $50,000. Investment A generates $25,000 in revenues  for the next three
years, whereas Investment B generates $20,000 in revenues for the next 20 years. Using payback
principles, Investment A is more profitable than Investment B because you recover the Initial
Investment Cost earlier with Investment A. However, Investment A generates revenues for only
three years,  whereas Investment B continues to  earn revenues  for  20  years.   This  example
illustrates that an investment's  payback does not necessarily reflect its  overall profitability
because payback only measures the time it takes to reach the break-even point of an investment.
For P2 projects, this can be an especially significant limitation because many  Annual Operating
Costs may occur several years after the Initial Investment Cost.

A second limitation is that complex scenarios  can have multiple paybacks when  Annual
Operating Costs vary significantly from year to year or when there are Initial Investment Costs in
multiple years. P2/FINANCE does not calculate a Discounted Payback for scenarios that are too
complex; instead it reports NA.
Accessing Scenarios

The Incremental Profitability Analysis sheet does not contain different sections for each scenario.
Therefore, Alt+C does not function within this sheet.  When you select Alt+C, the menu of
different scenarios appears at the top of the screen,  but the selection of a scenario does not
change your location in the sheet.
Printing Scenarios

To print the Incremental Profitability Analysis sheet, select Alt+P to access the general print
menu at the top of the screen. From this menu, choose Analysis with the cursor or type trie letter
A.
Accessing Help

To access the on-line help screen for the Incremental Profitability Analysis sheet, select Alt+H
from anywhere within the sheet.  This help screen defines  each of the financial indicators
reported on the Incremental Profitability Analysis sheet.  To exit the help screen, select the
HOME key to return to the top of this sheet or Alt+G to move to a different sheet.
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                         Case Studies
An  Example of a  Basic Analysis

This case study illustrates how P2/FINANCE can be used for a relatively basic project analysis.
This example is based on a factual case study that has been modified to better illustrate some of
P2/FINANCE's features.
Conceptualize the Analysis

In this example, an auto maintenance shop that has been sending its waste engine oil off-site for
disposal evaluates the purchase of an on-site waste oil burner as an alternative. The shop hopes that
the waste oil burner can reduce both off-site waste disposal costs and facility heating costs.  The
shop compares the Initial Investment Costs and Annual Operating Costs associated with the waste
oil  burner with the Annual Operating Costs of its current oil handling process—off-site waste
disposal.
Develop a Cost Inventory

The shop manager begins the analysis by developing an inventory of costs and savings that he
thinks  might change with the switch to a waste oil burner, as shown in Table 4.  To help develop
this inventory, the shop manager refers to the Total Cost Assessment Cost Inventory provided in
Appendix A of this Guide.
              Table 4. Cost/Savings Inventory for Waste Oil Burner Analysis
        Initial Investment Costs
        •^ Burner Equipment (incl. delivery, tax)
           In-house Engineering
           Utility Connections (Electricity)
        -^ In-house Training
        •> Heating Permit
        •>• Related Equipment
        •^ Installation Fees
Annual Operating Costs
 •^Maintenance
   Operating Labor
 H> Waste Disposal Labor
 •^ Waste Disposal Fees
 •^Heating Costs
   Storage Space
Looking back over the cost inventory, the shop manager narrows down the list of relevant Initial
Investment Costs to those cost items he will quantify for the analysis and marks those items with an
^ in Table 4.  Through discussions with the equipment vendor,  the manager  learns  that any
engineering services required for the waste oil burner are included in its purchase price, thereby
eliminating the need for any in-house engineering labor. Similarly, the manager initially foresaw a
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need to do some electrical work to install the burner, but later realizes that he can relocate the
burner to a different comer of the shop that already has suitable electrical connections, eliminating
the need for this expenditure.

The shop manager also narrows down its list of relevant Annual Operating Costs and marks those
he plans to quantify with an -^. Through discussions with other shops that have installed waste oil
burners, the manager learns that the labor required to operate the unit under normal conditions is
negligible, leading the shop manager to decide against quantifying this cost.  Storage space (i.e.,
floor space for the burner) was  a relevant Annual Operating Cost that the shop owner felt was
difficult to quantify.  To simplify the analysis, the manager chooses to include the loss of shop floor
space only as a qualitative consideration in the analysis.
Collect Cost Data

With this inventory in hand, the shop manager begins the data collection process, using billing
records to determine current expenditures and talking to the vendor and other shops about the
expected costs of the waste oil burner.
Base Scenario: Current Oil Handling Process

The Base Scenario reflects the shop's usual off-site waste disposal arrangement.  The scenario
includes only Annual Operating  Costs  because no Initial Investment Costs are required for
business-as-usual continuation of oil pick-up by an external waste vendor.
Annual Operating Costs

The proposed investment hi a waste oil burner impacts current costs related to waste disposal and
heating. The Base Scenario therefore includes the business-as-usual estimates for these cost items.
Waste Oil Handling- Vendor Fees
For business-as-usual, the shop temporarily collects waste oil in mobile 5 gallon storage containers
on the shop floor and then transfers these into a 500 gallon double-walled above ground storage
tank located just outside the facility.  According to the shop's billing records, the shop generally
pays its waste disposal vendor $1000 annually to pick up waste oil on an as-needed basis. This fee
includes the cost of disposal and applicable manifesting (paperwork) fees.
Waste Oil Handling - In-house Labor
The shop manager estimates the in-house labor associated with business-as-usual waste oil pick-ups
to equal approximately 0.5 hours of management labor per scheduled pick-up.  Assuming a fully
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burdened labor cost (i.e., a cost that includes employee benefits) of $30/hour, the ten waste oil pick-
ups per year require five labor hours for an annual cost of $150.
Building Heating System
Currently, the shop uses one gas-fired boiler with a maximum heat input rating of 1.82 million
BTUs/hour for heating the facility in the winter months.  Based on its billing records, the shop used
approximately 2,613 million BTUs (equivalent to 24,722 hundred cubic feet of natural gas) to heat
the facility during the previous year, at a total cost of $17,808.
Alternative Scenario 1:  Waste Oil Burner

In this scenario,  the purchase of a waste oil burner replaces the shop's current off-site waste
disposal arrangement  This scenario includes the Initial Investment Costs related to the purchase
and start up of a waste oil burner as well as its Annual Operating Costs.
Initial Investment Costs

Alternative Scenario 1 requires the purchase of a waste oil burner (including delivery charges),
installation of the burner,, start-up training labor time, and a heating permit from the city.
Waste Oil Burner and Other Equipment
The equipment vendor quoted a cost of $4,331  for  purchase of the necessary equipment—a
ceiling-hung UL  listed burner, a stand, a 500 gallon storage tank, and a support package of the
necessary hardware and brackets.  Additional equipment needed to operate the waste oil burner
include a 115V AC @ 60 Hz hookup and an air compressor for a total of $291. There is a $73
delivery charge for each item, resulting in a total delivery charge of $292. According to the vendor.
the equipment has a lifetime of 10 years and no salvage value.  The shop depreciates equipment
using DDE over 5 years.
Installation Fees
The vendor will install the equipment for a fee of $970. The installation cost is also depreciated
over 5 years using DDE.
Start-up Training Labor
With the purchase of the waste oil burner equipment, the vendor offers a one-hour training session
for at least two people in the shop.  The shop manager decides that one technician in addition to
himself should attend the training session, at a total internal labor cost (including labor burden) of
$55.  The shop is not required to depreciate this cost, but instead can expense it, using the
Depreciation Method, EXP.
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 Heating Permit
 The vendor reminds the manager that the shop will have to obtain a heating permit from the city
 in order to operate the oil burner on-site.  Such a permit costs $15.50 per every $1000 spent on
 capital, labor, and materials. The total cost of the waste oil burner (excluding delivery charges)
 is $5,592, which corresponds to a one-time permit  fee of $89.  The permit fee is  directly
 expensed, using the Depreciation Method, EXP.


 Annual Operating Costs

 Alternative Scenario 1 impacts the shop's operating costs related to waste disposal and heating for
 the facility.  In addition,  the waste oil burner generates an additional Annual Operating Cost—
 burner maintenance.
Waste O/7 Handling - Vendor Fees
The purchase of a waste oil burner would eliminate all costs associated with disposal of waste
oil, including manifesting and disposal fees.


Waste Oil Handling - In-house Labor
The purchase of a waste oil burner would also eliminate all in-house labor costs associated with
waste oil handling for vendor pick-ups.
Heating Costs
The shop manager uses the'shop's waste shipment manifests to estimate that the shop generates
about 3,300 gallons  of waste per year.  Based on a heat value table provided by the vendor, the
manager knows that this quantity of waste oil will generate a maximum of 462 million BTUs of
heat. This quantity of heat corresponds to 17.7% of the annual heating requirement for the facility,
and will lower the facility healing bill to about $14,660 per year.
Maintenance Costs
The purchase of a burner will require some burner maintenance effort each year.  To minimize the
in-house labor required, the manager would purchase a maintenance contract from the vendor for
$220 each year.
Enter the Financial Parameters

Having collected all of the relevant cost data for the analysis, the shop manager begins to enter
the data into P2/FINANCE. On the Project Title sheet, he enters Waste Oil Burner Analysis as
the Project Title.  He enters other important general information on this sheet including a brief
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discussion of the cost items that he decided not to quantify when he was developing the cost
inventory, such as the increased space needs of the waste oil burner.
Default Parameters sheet

The shop manager opens the Default Parameters sheet of P2/FINANCE by typing Alt+G, D. For
the Global Parameters, he chooses to not explicitly consider inflation and escalation in the cash
flow analysis and therefore sets the Inflation Rate to 0%. To accompany these uninflated cash
flows, the manager also needs to choose a (real) Discount Rate that does not include the effect of
inflation.  After consulting with staff from the state Small Business Development Center, the
shop manager enters a Discount Rate of 15%.

The manager also assumes that the cash flow changes resulting from the investment will not alter
the shop's current Income Tax Rates: 2% for Local, 6% for State, and 23.4% for Federal, giving
an Aggregate Income Tax Rate of 29.5%. On the advice of the shop's accountant, the manager
defines double declining balance (DDB) as the default Depreciation Method and 5 years as the
default Depreciation Period.

For the Scenario Parameters, the manager defines the Name, default Investment Year, and
default Lifetime for each scenario. The Alternative Scenario 1, Waste Oil Burner, has a default
Investment Year of 0 and a default Lifetime of 10, based on vendor assurances that the waste oil
burner will  function problem-free for at least  10 years.  The Base Scenario, Current Oil
Handling Process, therefore also has a default Investment Year of 0 and a default Lifetime of 10.

After entering all of the relevant data on the Default Parameters sheet, the shop manager presses
Alt+D to apply these parameters to all of the cost categories on the Initial Investment  Costs and
Annual Operating Costs sheets.
Enter the Cost Data
Initial Investment Costs sheet

The shop manager then opens the Initial Investment Costs sheet by typing Alt+G, I.  In the
Initial Investment Costs sheet, the manager moves to the Alternative Scenario 1 section of this
sheet by typing Alt+C, 1.  In this scenario, the manager modifies  the cost category titles to
reflect  the cost data for the analysis.  He defines the following four Initial Investment Cost
categories: Waste Oil Burner and Other Equipment, Installation Fees, Start-Up Training
Labor, and Heating Permits. He then deletes all of the remaining default cost category titles on
the sheet. Because the names of the Initial Investment Cost categories must remain consistent
through the scenarios within a project, P2/FINANCE automatically  copies these cost category
titles to the other scenarios.
                                       4-5

-------
P2/FINANCE Version 3.0
Case Studies
Starting in Alternative Scenario 1, the manager inputs a brief description of the cost items within
each Initial  Investment Cost category.   For example,  under Waste Oil Burner and Other
Equipment, he defines the following three cost items:  1) Burner, stand, and storage tank; 2)
AC hookup and air compressor; and 3) Delivery charge. For each cost item, he inputs the
cost developed through his earlier data collection efforts.  Where necessary, he modifies the
parameters for that cost category.  For example, under the cost category Start-up Training
Labor, he types an entry for One-hour session for two people and enters  a cost  of $55.
Because the shop can directly expense the training costs associated with the investment, the shop
manager changes the default Depreciation Method to EXP and deletes the Depreciation Period.

After finishing data input related to the Alternative Scenario 1, the manager moves to the Base
Scenario by typing Alt+C, B.  The Base Scenario does not require an Initial Investment Cost
because it reflects the shop's current off-site waste disposal arrangement. To make this clear, the
manager types a brief note in each cost category indicating that there are no  Initial  Investment
Costs and inputs a $ value of 0. For example, for the Waste Oil Burner and Other Equipment
cost category, the manager types No burner or other equipment and inputs $0 as the cost.
Annual Operating Costs sheet

The shop manager opens the Annual Operating Costs sheet by typing Alt+G, O.  Once in the
sheet, he moves to the section for Alternative Scenario 1 by typing Alt+C, 1.  In this scenario,
the manager modifies the cost category titles to reflect the cost data for the analysis.  He defines
the following four Annual Operating Cost categories:  Waste Oil Handling -  Vendor Fees,
Waste Oil Handling - In-house Labor, Heating, and Maintenance.  He then deletes all of the
remaining default cost category titles on the sheet.  Because the names of the Annual Operating
Cost categories must remain consistent through the scenarios within  a project,  P2/FINANCE
automatically copies these cost category titles to the other scenarios.

Starting in Alternative Scenario 1, the manager inputs a brief description of the cost items within
each Annual Operating Cost category. For example, under Maintenance, he defines the  cost
item,  Vendor  contract for burner maintenance.   For each  cost item, he inputs  the  cost
developed through his  earlier data collection efforts.   For example,  under the cost  category
Heating, he types an entry for Reduced gas boiler costs and enters a cost of $14,660.

After finishing data input related to the Alternative Scenario 1, the manager moves to the Base
Scenario by typing Alt+C, B. In the Base Scenario, the manager inputs a description of the  cost
items within each Annual Operating Cost category and for each cost item, inputs the dollar value
of the cost. For example, under the cost category Waste Oil Handling - Vendor Fees, he
defines a cost item, Vendor payments (10 pickups/year) and inputs a cost of $1,000.
                                      4-6

-------
P2/FINANCE Version 3.0
Case Studies
Generate Reports

Having completed all of the necessary data entry, the shop manager reviews the four reports
available with P2/FINANCE.

Scenario Summary sheet

The manager opens the  Scenario Summary sheet by typing Alt+G, S.  He first checks the
accuracy and completeness of the data he just entered by moving to the Alternative Scenario 1
section of this sheet by typing Alt+C, 1. To make any changes to the data for this scenario, he
types Alt+G, and selects either I for the Initial Investment Costs  sheet or O for the Annual
Operating Costs sheet. P2/FINANCE automatically moves you to the same scenario in which
you were working in the Scenario Summary sheet. For example, if you are in the Alternative
Scenario 1 section of the Scenario Summary sheet and you choose to open the Initial Investment
Costs sheet, P2/FINANCE automatically moves you to the Alternative Scenario 1  section of the
Initial Investment Costs sheet.

After reviewing the contents of Alternative  Scenario  1, the shop manager moves to the Base
Scenario by  typing Alt+C, B.  Here, he checks the accuracy and completeness of the Base
Scenario.
Tax Deduction Schedule sheet

To open the Tax Deduction Schedule sheet, the shop manager types Alt+G, T.  Once inside the
sheet, he moves to the Alternative Scenario 1 section by typing Alt+C, 1. Here, he reviews the
depreciation calculations related to the waste oil burner investment.  Because the Base Scenario
does not require an investment, he does not review the Base Scenario section of this sheet.
Incremental Cash Flow Analysis sheet

To open the Incremental Cash Flow Analysis sheet, the shop manager types Alt+G, C.  Once
inside the sheet, he moves to the section that reflects the comparison of the Alternative Scenario
1 and the Base Scenario by typing Alt+C, 1. Here he reviews the impact the investment would
have on the shop's cash flows.   He focuses on the Tax Calculation and the Cash Flow
Calculation at the bottom of the sheet.
Incremental Profitability Analysis sheet

To open the Incremental Profitability Analysis sheet, the shop manager types Alt+G, A.  In this
sheet, he inputs an optional time horizon of 3 years over which he can evaluate the profitability
                                     4-7

-------
P2/FINANCE Version 3.0
Case Studies
of the investment. He then uses all three profitability indicators to determine whether the shop
should invest in the Waste Oil Burner Project.
Summary of Results

The shop manager focuses most of his attention on the investment's Net Present Value (NPV)
because he knows that it has the least limitations and gives the most accurate picture of the
investment's profitability. The Discounted Payback measure indicates that the NPV becomes
positive between Years 2 and 3. Given the manager's conservative assumptions about the cost of
the investment and its expected savings, he feels confident that a waste oil burner would be a
wise investment for the shop and decides to propose this investment to the owner of the shop.
                                     4-8

-------
P2/FINANCE
Version 3.0
                                                       Title-pg1
Date: 9/1/96
 PROJECT TITLE:
Waste Oil Burner Analysis
 PREPARED BY:


 ORGANIZATION:
Shop Manager
Auto Maintenance Shop
 COMMENTS:
Analysis assumes that the operating labor associated with the waste oil burner Is
negligible based on conversations with other shop managers who have installed
similar equipment. The loss of storage space due to the purchase of a waste oil
burner has not been included in this quantitative analysis, but should remain a
qualitative consideration.
                                         P2/FINANCE

                              Pollution Prevention Financial Analysis
                                   and Cost Evaluation System

                                          Version 3.0
                                         Copyright 1996
                                         Tellus Institute
                                          Boston, MA

-------

-------
Analysis Name: Waste Oil Burner Analysis
DEFAULT PARAMETERS
Date: 9/1/96 Default-pg1
Global Parameters
P2/FINANCE uses the Inflation Rate, Discount Rate, and Income Tax Rate
entered here for calculations on the Tax Deduction Schedule, Incremental
Cash Row Analysis, and Incremental Profitability Analysis sheets.
Inflation reflects the overall rate at which you expect prices to increase.
For cases in which this Inflation Rate does not fully capture expected
price changes, P2/FINANCE allows you to define an additional
Escalation Rate for each Annual Operating Cost category.
Inflation Rate
.?:'! :y:?:w;io;o%:!
The Discount Rate accounts for the fact that there is an opportunity
cost to using money — if you choose to invest in one project, you
lose the opportunity to gain a return on another investment Many
companies use their weighted average cost of capital as a Discount
Rate. For more information on Discount Rate and its relationship to
inflation, seethe on— line help.
Discount Rate &;. : : .: : : ISXK&j
State and local income taxes are deductible from the taxable income
used to calculate federal taxes. Enter your Local, State, and
Federal Income Tax Rates below, and P2/FINANCE will calculate an
Aggregate Income Tax Rate.
Local Income Tax Rate
State Income Tax Rate
Federal Income Tax Rate
Aggregate Income Tax Rate
2.0%:
6.0%:
23.4%:

29.5%


Tfe&'IfcsfeiHlt f*aj&njs&F& <&PfXfaf'' ^ '' v •• *• "" •••• •••• ••'' "" "• ••
P2/FINANCE uses the Depreciation Method and Period
defaults for all Initial Investment Costs. You can chang
Depreciation Method and Period for individual categori
Investment Costs sheet.
Depreciation Method
Depreciation Period
For Depreciation Method, use one of these abbreviatioi
Straight Line
1 50% Declining Balance switching to Straight Line
200% Declining Balance switching to Straight Line
Expensed (lax deductible in the first year)
Working Capital (not tax deductible)
entered here as
3 the
ss on the Initial
DDB
5.0
is:
SL
1.5DB
DDB or 2DB
EXP
we


«a» &B ajpplifcd te,»ie«nt1r£ project «fe t%^resslig§ MJ^jDv
ft#.»0|U9fc Ajt3t-V^ *&&&& yfca &m$a?$"m&yw *g«$#tes4
Scenario Parameters
P2/FINANCE allows you to create two alternative financial analysis
scenarios, which represent different investment options you are
considering. You also can create a baseline scenario, which
contains data on your current "business-as-usual" operations. On
the Incremental Cash Flow Analysis and the Incremental Profitability
Analysis sheets, the Alternative Scenarios are compared to the Base
Scenario, i.e., P2/FINANCE calculates incremental cash flows and
profitability.
The Investment Year and Lifetime entered here are used as defaults
for both Initial Investment Costs and Annual Operating Costs.
P2/FINANCE assumes that investments occur AT THE END OF THE
INVESTMENT YEAR so the default Start Year for Annual Operating
Costs is Investment Year + 1 . The most common Invesbnent Year
will be Year 0, i.e., most Initial Investment Costs are incurred at the
very beginning of the project Lifetime.
Alternative Scenario 1
Name
iWaste^OilSBufner • ' ..„•••.'': ..it^^^^W":"^'^

Inv. Year I • ' : . * 0 I Lifetime £:* w- ; X '"* : .1O;|

Start Year I 1| End Year I 10 1

Alternative Scenario 2
Name
.••' .. y . .' ., '••.'. :: :.:i::;y:4c.vS">'.'.J?.;--: .'i'^

Inv. Year h :•:.•••• • 0| Lifetime Mi-^^^v^asj

Start Year | 1| End Year] 15 1

Base Scenario
Name
liCurrerit Oil iHandlirio; Process , ; • . • \' y - . ' • •• > .' ;' i •: . *|

Inv. Year |; • . • ... • 0 | Lifetime [, ;; •; >.. :• -. -,••, '•• ••• f'^-0!\

Start Yearl 1| EndYeari 10 1


-------
INITIAL IN VESTMENT COSTS - Alternative Scenario 1
^tem^SctqwiDLlLjtfilrttQLBuCDfr Date: 9/1 796 lnv-Alt1-oa1
Intta) divestment Copt*
S Amount Initial Investment Costs
I Waste Oil Burner and Other Equipment
Dep. Method DOB
Dep. Period
Investment Year
5.0 Lifetime
Boner, stand, and storage tank
AC hookup and air compressor
Descry charge






Salvage Value I
TOTAL
0
10
34,331
S291
$292





I
54,914
| Start— Up Training Labor
Dep. Method [EXP
Dep, Period I
Investment Year
0,0 Lifetime
One-hour taSntng session for two people





Salvage Value I

Dep. Method DOB
Dep. Period
TOTAL
0
10
S55





S55

Investment Year
. 5.0 Lifetime



" 	 : : '••'• •'''•

SarvaoeValuel

Dep, Method DOB
Dep, Period

TOTAL
0
10





$0

Investment Year
5.0 Lifetime




Satvaoe Value t

Dep, Method DOB
Dep, Period

TOTAL
0
10




SO

Investment Year
5.0 Lifetime



Satvaoe Value^

0
10



TOTAL I SO


Installation Fees
Dep. Method
Dep. Period
DDE
S Amount

Investment Year
•5.0| Lifetime
Equipment installation






,"•; "•

Salvage Value

TOTAL
0
10
$970








$970
| Heating Permits

Dep. Method
Dep. Period
EXP
0.0
Investment Year
Lifetime
One— timeifee





Salvage Value
Dep. Method
Dep. Period


DDE
5.0
TOTAL
Investment Year
Lifetime





Salvage Value | .


Dep. Method
Dep. Period
,,
DDE
5,0
TOTAL
Investment Year
Lifetime

-


Salvage Value
Dep. Method
Dep. Period


DDE
5.0
TOTAL
Investment Year
Lifetime



Salvage Value


TOTAL
0
10
$89





$89

0
10





$0

0
10




so

0
10



$0


-------

Dep. Method
Dep. Period


DDB:
5.0
Investment Year
Lifetime
!
' ' • 'X' : '

* l

Salvage Value
1
i Dep. Method
Dep. Period


DDB
5.0
TOTAL
Investment Year
Lifetime

• . i


| Salvage Value


TOTAL
0
10





$0

0
10




$0


Inv-Alt1 -pg2
Dep. Method
Dep. Period
DDB:
;5.0
Investment Year
Lifetime




' -
Salvage Value
Dep. Method
Dep. Period


DDB:
;s;o
TOTAL
Investment Year
Lifetime



"
Salvage Value
-

0
-• 10





$0

0
10
'



TOTAL I SO


-------
I INITIAL INVESTMENT COSTS - Base Scenario
->fiU tSWKtolfiHfU rt QHUW^ftBLEfP0635 Date: 9/1 /96
~Tr»aj Investmen? Costs S Amount Initial Investment Costs
I Wast* Oil Burner and Other Equipment
Dtp, Method DDB Investment Year
Dtp, Period 5.0 Lifetime
No burner or other equipment








SaWao Value | I TOTAL
0
10
SO


,





so
| Start— Up Training Labor
Dtp, Method DDB Investment Year
Dcp, Period 5.0 Lifetime
No start-up braining labor



1 	 • •:'•:'

Salvage Value! 1 TOTAL
0
10
$0





so
1
Dap. Method I DOS Investment Year
Dep. Pec!od[_ 5,0 Lifetime





Salvage Value) TOTAL
0
10





so
I
Dep. Method DOB Investment Year
Dep. Period 5.0 Lifetime

	 !' ' ' "" •


Satvaoe Value 1 1 TOTAL
0
:1tt




so

Deo Method DDB Investment Year
Dep, Period 5.0 Lifetime



Salvage Value | TOTAL
0
10



so


S Amount
I Installation Fees

Dep. Method
Dep. Period
DDB
5.0
Investment Year
Lifetime
No installation fees : .



< .'. ;




Salvage Value | ;
TOTAL
0
10
$0



„



t
$0
Heating Permits

Dep. Method
Dep. Period
DDB
5.0
Investment Year
Lifetime
No heating permit







Salvage Value
Dep. Method
Dep. Period


DDB
5.0
TOTAL
Investment Year
Lifetime





Salvage Value
Dep. Method
Dep. Period


DDB
;£0
TOTAL
Investment Year
Lifetime




Salvage Value
Dep. Method
Dep. Period


DDB
50
TOTAL
Investment Year
Lifetime



Salvage Value


TOTAL
0
10
so





so

0
10





$0

0
10
/

•,
-1
so

0
10

1 , , ,

SO


-------

Dep. Method
Dep. Period
:. .-• : ••. '.".




Salvage Value

Dep. Method
Dep. Period




Salvage Value


DDB
5.0







DDB
5.0







Investment Year
Lifetime


f


TOTAL

Investment Year
Lifetime




TOTAL


0
10





$0

0
10




$0




















Dep. Method
Dep. Period





Salvage Value

Dep. Method
Dep. Period




Salvage Value


•DDB .
,5.0:







DDB
5.0







Investment Year
Lifetime





TOTAL

Investment Year
Lifetime




TOTAL

Inv— Base— pg2
O
10





$0

0
10




$0


-------
ANNUAL OPERATING COSTS - Alternative Scenario 1
Uf&^'&^»'^^^^^^^it'Sii^^K^^^^Mm^M^&&S^M
Ajj^r^jfva^£ff^iQJ4_V&St« OJUBurner Date: 9/1/96 Op-Alt1-oa1
Annual Oo*f«ting Costs S Amount Annual Operating Costs $ Amount
j Waste OH Handling - Vendor Fees
Escalation Ratal 0.0%) Start Year
End Year
No v»ndoff««s for disposal or waste 08
-1







TOTAL
1 Heating
Escalation Ratet b".0%| Start Year
End Year
R«doced eac bol*r costs




j
TOTAL
Escalation Ratef^ 0,0%1 Start Year
End Year





TOTAL
1
Escalation Rate! 0.0% I Start Year
End Year


"i

TOTAL
\
Escalation Rate| 0.0% I Start Year
End Year

1 ' i

TOTAL
1
10
so





s

'
$0

1
10
$14,660
t



i , •,
S1 4.660

1
10
,

.,

,
$0

1
10




so

1
10
-


so


Waste Oil Handling - In— house Labor
Escalation Rate | 0.0% | Star t Year
End Year
No in— house costs for disposal of waste oil





,r


TOTAL
Maintenance
Escalation Rate I 0.0% I Start Year
End Year
Vendor cbritractfor burner maintenance :





TOTAL
Escalation Rate |.. • 0:0% I Start Year
End Year





TOTAL
Escalation Rate I ; • • : .;• , , .. •••? : :;?:::0:0% I Start Year
End Year




TOTAL
Escalation Rate | : . x >•• . . ; 0:0% I Start Year
End Year



TOTAL
i
10
SO








SO

1
10
$220





$220

1
10


'


$0
^
1
10




$0

1
10
- '

t % ?
so


-------
•'.......'
Escalation Rate] 0.0% | Start Year
End Year
'.- • • f




TOTAL

Escalation Rate I. ;:0:0%:| Start Year
End Year

1
-

TOTAL


1
10





$0

1-
10




so



















...
Escalation Rate | 0.0%] Start Year
End Year
.,


'

TOTAL
^
Escalation Rate I 0.0%| Start Year
End Year




TOTAL

Op-Alt1-pg2
1
10





$0
f f • -.
1
10




$0


-------
ANNUAL OPERATING
r . grtt< eo^ *tj><:a8J^wi&^;*t^
Pffif SceW"O'J?U"ent O>l,y-(>ndling.process
COSTS - Base Scenario i
Date: 9/1/96 OD— Base— oa1
*%W«J Operating Costs S Amount Annual Ooerafinq Costs $ Amount
! Waste Oil Handling - Vendor Fees
Escalation Bat* | . 0.0%) Start Year
End Year
V«ndor payments (10 pickups/year)







•
TOTAL
| Heating
Escalation Rat* f 0.0% I Start Year
End Year
Gas boier costs
	 ^




TOTAL
Escalation Rat* ( 0.0%) Start Year
End Year





TOTAL
Escalation Ratal 0,0%) Start Year
End Year




TOTAL
Escalation Ratal 0.0% I Start Year
End Year



TOTAL
1
10
81,000








si,ooo

1
1&
$17,808




-
817,808

1
10





SO

1
10




SO

:••."•:••• &;!r - -.I.; :;., xv*
,„:• •-.• ?•< '•:•.;.'.;.•• -.iff
,•,,•• .'•-,,:'•''' I.'-:: ''••'':'.'>''E
.,; . .:,;..,*••/•••., :f:,S.;:''
!••'*'!•': Sx'>rs.;i,':v;h:':iv;.:
SO


Waste Oil Handling - In-house Labor
Escalation Rate].: • , ••. . 0.0% | Start Year
End Year
Rvfthoursjn-hoviseilabor (0.5 hours/pickup, 10 pickups/year)






_,
.
TOTAL
Maintenance
Escalation Ratel; , 0.0% | Start Year
End Year
No waste oil burner to maintain


•


TOTAL
Escalation Rate |- 0.0% 1 Start Yisar
End Year





TOTAL
Escalation Ratel'-;5v : 0.0%1 Start Year
End Year




TOTAL
Escalation Rate I 0.0% 1 Start Year
End Year


,
TOTAL
1
10
$150

y
-. , »
^ ,
^ '
'•
,
,
$150

1
10
80
v
>
i

"• *• T
$0

1
10
, r •




SO

1
10

,


SO

1
10
f
1

so


-------

Escalation Rate ;; ;0.0%| Start Year
End Year





TOTAL

Escalation Rate t: . : :0.0%:l Start Year
End Year

• • • . 1

.•
TOTAL


1
ia





so

1
10




•so




















Escalation Rate | 0.0%








Escalation Rate! 0.0%








Start Year
End Year





TOTAL

Start Year
End Year




TOTAL

Op-Base-pg2
. 1
10





$0

1
10




so


-------
SCENARIO SUMMARY - Alternative Scenario 1
ABflfflitSyg SctOSteC WastejQii Burner Date: 9/1 196

INJTIAL INVESTMENT COSTS
Waste Oil Burner and Other Equipment
Installation Fees
Start-Up Training Labor
Htatlng Permits










ANNUAL OPERATING COSTS
Waste OB Handling - Vendor Fees
Waste OB Handling — In-house Labor
Heating
Maintenance










GLOBAL PARAMETERS
Project Ttte: Waste OH Burner Analysis
Inflation Rate
Discount Rate
Aggregate Income Tax Rate
Default Depreciation Method
RSfelADfSTf^SlfeD-te'od

Cost
$4,914
970
55
89
0
0
0
0
0
0
0
0
0
0
Cost
$0
0
14,660
220
0
0
0
0
0
0
0
0
0
0
Salvage
Value
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Summ— Alt1 — Da1
Depreciation
Inv. Year Lifetime
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1C)
10
10
10
10
10
10
10
10
10
10
10
10
10
Start Year End Year














1
1
1
1
1
1
1
1
1
1
1
1
1
1
10
10
10
10
10
10
10
10
10
10
10
10
10
10
Period
5
5
0
0
5
5
5
5
5
5
5
5
5
5
Escalation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Method
DDB
DDB
EXP
EXP
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB












































SCENARIO PARAMETERS

0.0%
15.0%
29.5%
DOB
5







Default Investment Year
Default Lifetime
Default Start Year
Default End Year




















0
10
1
10


-------
SCENARIO SUMMARY - Base Scenario
Base Scenario- Current Oil Handlina Process Date: 9/1 /96

INITIAL INVESTMENT COSTS
Waste Oil Burner and Other Equipment
Installation Fees
Start-Up Training Labor
Heating Permits










ANNUAL OPERATING COSTS
Waste Oil Handling - Vendor Fees
Waste Oil Handling - In-house Labor
Heating
Maintenance










GLOBAL PARAMETERS
Project Title: Waste Oil Burner Analysis
Inflation Rate
Discount Rate
Aggregate Income Tax Rate
Default Depreciation Method
Default Depreciation Period

Cost
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Cost
$1,000
150
17,808
0
0
0
0
0
0
0
0
0
0
0
Salvage
Value
$0
0
0
0
0
0
0
0
0
0
0
0
.0
0
Summ— Base— pal
Depreciation
Inv. Year Lifetime
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
10
10
10
10
10
10
10
10
10
10
10
10
10
Start Year End Year














1
1
1
1
1
1
1
1
1
1
1
1
1
1
10
10
10
10
10
10
10
10
10
10
10
10
10
10
Period
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Escalation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Method
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB












































SCENARIO PARAMETERS

0.0%
15.0%
29.5%
DDB
5







Default Investment Year
Default Lifetime
Default Start Year
Default End Year




















0
10
1
10


-------
TAX DEDUCTION
Alternative Scenario 1 : Waste OH Burner
Operating Year
Depreciable Initial Investment Costs
Expensed Initial investment Costs
Working Capital initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Waste Oil Burner and Other Equipment (DDB)
Initial Investment Cost and Remaining Book Value
Installation Fees (DDB)
Initial Investment Cost and Remaining Book Value
Start- Up Training Labor (EXP)
Initial Investment Cost and Remaining Book Value
Hooting Permits (EXP)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DOB)
initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaaed Equipment
Total Tax Deductions
SCHEDULE -
Date:
0
5,884
144
0
6,028






4,914

970

55

89

0

0

0

0

0

0

0

0

0

0

0

0
Alternative
9/1/96
1
0
0
0
0





983 1
Scenario
1


Tax-Altl -pg1
2
0
0
0
0





,572
3,931 2,359 1
194
776
55
0
89
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,177 1
144
0
1,321 1
310 t
466
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
,883 1
0
0
,883 1
3
0
0
0
0





943
,415
186
279
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
,130
0
0
,130
4
0
0
0
0





566
849
112
168
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
678
0
0
678
5
0
0
0
0





566
283
112
56
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
678
0
0
678

-------
TAX DEDUCTION SCHEDULE - Alternative Scenario 1
Alternative Scenario 1 : Waste Oil Burner
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Waste Oil Burner and Other Equipment (DOB)
Initial Investment Cost and Remaining Book Value
Installation Fees (DOB)
Initial Investment Cost and Remaining Book Value
Start- Up Training Labor (EXP)
Initial Investment Cost and Remaining Book Value
Heating Permits (EXP)
Initial Investment Cost and Remaining Book Value
(DOB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial In vestment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Bpok Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Tax-Altl -pg2
6
0
0
0
0





283
0
56
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
339
0
0
339
7
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION SCHEDULE - Alternative Scenario 1
Alternative Scenario 1 : Waste Oil Burner
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Waste Oil Burner and Other Equipment (DDB)
Initial Investment Cost and Remaining Book Value
Installation Fees (DDB)
Initial Investment Cost and Remaining Book Value
Start- Up Training Labor (EXP)
Initial Investment Cost and Remaining Book Value
Heating Permits (EXP)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Tax-Alt1 -pg3
11
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
12
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION
Base Scenario: Current Oil Handling Process
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Waste Oil Burner and Other Equipment (DDB)
Initial Investment Cost and Remaining Book Value
Installation Fees (DDB)
Initial investment Cost and Remaining Book Value
Start- Up Training Labor (DDB)
Initial Investment Cost and Remaining Book Value
Heating Permits (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
SCHEDULE - Base
Date:
0
0
0
0
0






0

0

0

0

0

0

0

0

. 0

0

0

0

0

0

0

0
9/1/96
1
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Scenario



Tax-Base-pg1
a
6
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
4
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION
Base Scenario: Current Oil Handling Process
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken In that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Waste Oil Burner and Other Equipment (DDB)
Initial Investment Cost and Remaining Book Value
Installation Fees (DDB)
Initial Investment Cost and Remaining Book Value
Start- Up Training Labor (DDB)
Initial Investment Cost and Remaining Book Value
Heating Permits (DDB)
InJHaJ Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
I
I Total Depreciation
t Expensed Initial Investment Costs
— Taxable Gain (Loss) on Salvaged Equipment
, Total Tax Deductions
SCHEDULE -
Base
Scenario


Tax-Base-pg2
6
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
• 0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION SCHEDULE -
Base Scenario: Current Oil Handling Process
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capita! initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Waste Oil Burner and Other Equipment (DDB)
Initial Investment Cost and Remaining Book Value
Installation Fees (DDB)
Initial Investment Cost and Remaining Book Value
Start-Up Training Labor (DDB)
Initial Investment Cost and Remaining Book Value
Heating Permits (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Base Scenario
Tax-Base-pg3
11
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
\ o
0
0
0
0
0
0
12
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
.0
14
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0'
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
A^ajytfy^Lam*; Waste OH Burner Analysis
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Waste Oil Burner and Other Equipment
Installation Fees
Start- Up Training Labor
Heating Permits










Total Initial Investment Costs
Date: 9/1/96
0

$4,914
970
55
89
0
0
0
0
0
0
0
0
0
0
$6,028
1

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
2

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
3

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
CashFlow-Alt1 -oa1
4

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
5

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
INCREMENTAL ANNUAL OPERATING (COSTS)/SAV1NGS
Waste Oil Handling - Vendor Fees
Wast* Oil Handling - In-house Labor
Heating
Maintenance










Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
— Expensed Initial Investment Costs
+ Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 29.5%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Snvings
— Income Tax
— Initial Investment Costs
•f Recovery Of Working Capital
+ Salvage Value
After-Tax Cash Flow
Cumulative Cash Row
_jy.S_CQMnted-C9§b Flo^t

























6,028


($6,028)
(6.028)
($6.028)
$1,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
1,177
144
0
$2,757
814

$4,078
814
0
0
0
$3,264
(2,764)
$2.838
$1,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
1,883
0
0
$2,195
648

$4,078
648
0
0
0
$3,430
666
$2.593
$1,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
1,130
0
0
$2,948
871

$4,078
871
0
0
0
$3,207
3,873
$2.109
$1,000
150
3,148
(220)
0
0
.0
0
0
0
0
0
0
0
$4,078

$4,078
678
0
0
$3,400
1,004

$4,078
1,004
0
0
0
$3,074
6,947
$1.758
$1,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
678
0
0
$3,400
1,004

$4,078
1,004
0
0
0
$3,074
10,021
$1 .528

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Analysis NamefWaste Oil Burner Analysis
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Waste Oil Burner and Other Equipment
Installation Fees
Start-Up Training Labor
Heating Permits










Total Initial Investment Costs
CashFlow-Alt1 -oa.2
6

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
7

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
8

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
9

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
10

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Waste Oil Handling - Vendor Fees
Waste Oil Handling - In-house Labor
Heating
Maintenance










Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
- Expensed Initial Investment Costs
+Taxable Gain (Loss) on Salvaged Equipment
Taxable Income ;
Income Tax at 29.5%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
- Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
+ Salvage Value
After— Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
$1 ,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
339
0
0
$3,739
1,104

$4,078
1,104
0
0
0
$2,974
12,995
$1 .286
$1 ,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
0
0
0
$4,078
1,204

$4,078
1,204
0
0
0
$2,874
15,869
$1 ,080
$1,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
0
0
0
$4,078
1,204

$4,078
1,204
0
0
0
$2,874
18,743
$939
$1 ,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
0
0
0
$4,078
1,204

$4,078
1,204
0
0
0
$2,874
21,617
$817
$1 ,000
150
3,148
(220)
0
0
0
0
0
0
0
0
0
0
$4,078

$4,078
0
0
0
$4,078
1,204

$4,078
1,204
0
0
0
$2,874
24,490
$710

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INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Analysis Jvlame: Waste Oil Burner Analvsis
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Waste Oil Burner and Other Equipment
Installation Fees
Start— Up Training Labor
Heating Permits






I
'!"!


Total Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Waste Oil Handling - Vendor Fees
Waste Oil Handling — In— house Labor
Heating
Maintenance










Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
— Expensed Initial Investment Costs
4-Taxabte Gain (Loss) on Saivaqed Equipment
Taxable Income
Income Tax at 29.5%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
— Income Tax
— Initial Investment Costs
+ Recovery Of Working Capital
4- Salvage Value
After-Tax Cash Flow
Cumulative Cash Flow 24

CashFlow — Alt1 — Da3
11
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
o
$0
,490
$0
12
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
24,490
$0
13
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
24,490
$0
14
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
24,490
$0
15
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
24,490
$0

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                            INCREMENTAL PROFITABILITY ANALYSIS
Analysis Name: Waste Oil Burner Analysis                    Date: 9/1/96
                                                                          Profit-pg1
P2/FINANCE calculates three indicators of profitability.  (See on-line help for more detailed descriptions.)

Net Present Value (NPV), the most reliable indicator, is the value in today's dollars of the discounted future savings of
a project. A positive NPV indicates a profitable project. When considering multiple projects, the most profitable project
has the highest NPV.

Internal Rate of Return (IRR) is the Discount Rate for which the NPV of a project would equal zero. An IRR greater
than the Discount Rate indicates a profitable project. When considering multiple projects, the most profitable project usually,
but not always, has the highest IRR.  IRR cannot be calculated for some projects with irregular cash flows:

Discounted Payback is the time period within which the discounted future savings of a project repay the Initial Investment
Costs. A shorter payback period often, but not always, indicates a more profitable project because Discounted Payback
does not account for cash flows that occur after the payback period.  Discounted Payback cannot be calculated for some projects.
P2/FINANCE provides four time horizons for calculating Net Present Value and Internal Rate of Return.
P2/FINANCE automatically calculates the profitability over 5,10, and 15 years.
You may choose an optional fourth time horizon between 1 and 15 years.            Optional Time Horizon
This analysis calculates the incremental profitability of each Alternative Scenario relative to the Base Scenario.
Base Scenario Name:       Current Oil Handling Process
Net Present Value ($)
Scenario
Name
Years 0-5  Years 0-10  Years 0-15  Years 0-3
Alternative Scenario 1
Alternative Scenario 2
Waste Oil Burner
    4,798
       NA
                                                     9,631
                                                       NA
9,631
  NA
 1,513
   NA
Internal Rate of Return (%)

Scenario      	   Name
                                    Years 0-5   Years 0-10  Years 0-15 Years 0-3
Alternative Scenario 1
Alternative Scenario 2
Waste Oil Burner
    45.9%
      NA
                                                     52.7%
                                                       NA
  NA
  NA
29.7%
   NA
Discounted Payback (years)
Scenario
Name
  Payback
Alternative Scenario 1
Alternative Scenario 2
Waste Oil Burner
     2.28
      NA

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P2/FINANCE Version 3.0
                           Case Studies
An  Example  of a  Complex Analysis

This case study illustrates the use of P2/FINANCE to assess the profitability of a more complex,
multi-year investment. This example, again, is based on a real case study that has been modified to
better illustrate P2/FINANCE's features.
Conceptualize the Analysis

In this example, a large multinational  chemicals manufacturer evaluates a hard-piped,  batch
distillation solvent recovery system that would allow recovery of solvents from the chemical wastes
of three product lines and reuse of those solvents within the manufacturing process. Here, the firm
compares the purchase of the batch still with its business-as-usual waste handling practices—off-
site waste disposal and treatment
Develop a Cost Inventory

The firm's environmental engineer begins the analysis by developing an inventory of costs and
savings that potentially might change with the  investment in a batch still solvent  recovery
system, as shown in Table 5.  To  help develop this  inventory, she refers to the Total Cost
Assessment Cost Inventory provided in Appendix A of this Guide.

         Table 5. Cost/Savings Inventory for Batch Still Solvent Recovery Analysis
        Initial Investment Costs
        •^ Building
        •^ In-house Engineering
        -> Contractor Engineering
        ••>• Equipment Purchase
           (including Installation)
 Annual Operating Costs
•> Virgin Raw Materials Costs
•^ Off-site Hauling & Disposal Costs
•^ Waste Shipment Manifesting Labor
•^ Direct Operating Labor
•^Utilities
T> Permit Renewal
  Liability
Using this cost inventory, the environmental engineer then decides to identify those costs she will
quantify for the analysis (marked by a H>).  Most of the cost data are readily available via facility
records or simple labor time estimates made by facility personnel. Although some of the cost items
she chooses to quantify are much less significant than others, she decides to include them all hi the
analysis to illustrate that she has considered them in thinking through the project.
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The one relevant cost item the environmental engineer chooses not to quantify is liability.  She is in
general agreement with Purchasing staff and upper management that the less hazardous waste
generated, the better, and the less shipped off-site, the better, but is not sure how best to quantify the
potential dollar value of the liability "avoided" via the purchase of a hard-piped, on-site solvent
recovery system. She decides to postpone quantifying liability until after she sees the results of the
rest of the analysis.
Collect Cost Data

With this inventory in hand, the environmental engineer begins the data collection process by using
billing records, talking to the vendor, and requesting labor time estimates from production staff at
the facility.
Base Scenario:  Off-site Waste Disposal and Treatment

The Base Scenario reflects the business-as-usual costs of the firm's off-site waste disposal and
treatment arrangement for waste from the three product lines. The scenario includes only Annual
Operating Costs because no Initial Investment Cost is required for business-as-usual continuation
of pick-up by waste disposal vendors.
Annual Operating Costs

Currently, the firm manufactures two products (Product A and Product B) at the facility.  The
facility also plans to bring a new product on-line hi Year 2, Product X, the waste from which
could  also be handled by the batch still solvent recovery system.  Annual  Operating Costs
expected to change with the investment in  a batch still include the annual cost of virgin raw
materials, vendor disposal fees, waste manifesting labor, and the internal labor  required to
maintain vendor relationships (e.g., contract negotiations, site visits).
Year 1 Annual Operating Costs

The following  Year 1 costs  reflect the Annual Operating Costs for the facility's two current
product lines .
Virgin Raw Materials - Start Year 1
The purchase of a batch still recovery system would reduce virgin solvent purchase costs by
allowing recovery and recycle of solvents within the facility.  Purchasing records indicate that
virgin raw materials for the manufacture of Product A cost $234,000 annually in the business-as-
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usual Base Scenario.  The annual purchase cost for Product B virgin raw materials is $157,000.
These costs apply to Years 1-15.
Vendor Disposal - Start Year 1
The purchase of a batch still recovery system would impact the off-site waste disposal and
treatment costs for each of the product lines. From the facility's waste manifest records, the
environmental engineer calculates that, under the business-as-usual Base Scenario,  Product A
requires an annual off-site disposal cost of $104,000 and Product B requires an annual off-site
disposal cost of $283,000. Because the vendor disposal costs for both products are expected to
rise at a rate higher than inflation, the environmental engineer adds an Escalation Rate of 2.0%
to costs within this category. These costs apply to Years 1-15.
Manifesting Labor - Start Year 1
The preparation of hazardous waste shipment manifests for these two product lines requires in-
house labor. The environmental staff member responsible for this task estimates that manifesting
for Product A requires approximately 22  hours  per year  of his time, while manifesting for
Product B requires 50 hours per year.  Assuming a fully burdened labor cost (i.e., including
employee benefits) of $44 per hour, manifesting costs $968 annually for Product A and $2,200
annually for Product B.  These costs apply to Years 1-15.


Maintenance of Vendor Relationships - Start Year 1
Under the business-as-usual Base Scenario, the head of the facility's Purchasing Office spends
approximately 10 days per year maintaining the firm's relationships with multiple waste disposal
and treatment vendors through contract negotiations and site visits.   Assuming a labor cost of
$55 per hour, the sum of these activities translates into an annual cost of $4,400. These activities
also require $2,000 hi travel costs for site visits.  These costs apply to  Years 1-15.


Year 2 Annual Operating Costs

These include the additional Annual Operating Costs associated with the introduction of a new
product line at the facility—Product X.  The environmental  engineer correctly decided not to
include the  new revenues from Product X anywhere in the incremental analysis because the
revenues from Product X will not be  affected by  the purchase of a  batch solvent still, i.e., the
revenues will be the same for Alternative Scenario  1 as for the Base Scenario.
Virgin Raw Materials - Start Year 2
Beginning in  Year 2,  the facility expects to  bring a new product on-line, Product X.   The
manufacturing supervisor estimates that virgin raw materials for this product will  cost about
$414,000 annually.  She defines the Start Year for this new Annual Operating Cost as  Year 2 and
the End Year as 15.
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Vendor Disposal - Start Year 2
In the business-as-usual Base Scenario, waste disposal costs associated with Product X also have
a Start Year of 2 and an End Year of 15. The head of the Purchasing Office estimates the annual
off-site shipment  and disposal  cost for Product X waste  to  equal  approximately $862,000.
Again, because the vendor disposal cost for this product is expected to rise at a rate higher than
inflation, the environmental engineer adds an Escalation Rate of 2.0% to the costs within this
cost category.


Manifesting Labor - Start Year 2
When  the high  volume Product X comes on  line, preparation of hazardous  waste shipment
manifests will require approximately $3,500 annually of internal labor.


Maintenance of Vendor Relationships - Start Year 2 .
When the firm brings the third product line on-site,  the cost of maintaining vendor relationships
will increase by  approximately $4,000 annually.


Alternative Scenario 1: Batch Still Recovery System

Alternative Scenario 1 reflects the cost to  the firm of bringing a batch still recovery system on-
site to allow  recovery and reuse of solvents  in its manufacturing processes.  The scenario
includes the Initial Investment Costs associated with the  batch still as well as its Annual
Operating Costs.


Initial Investment Costs

With the assistance of the  facility manager,  an  equipment vendor, and  the manufacturing
supervisor, the environmental engineer obtains reasonable estimates for the Initial Investment
Costs and the timing  of the batch still project.  The initial investment for the solvent recovery
system would occur over a period of approximately 1.5 years. During the latter part of Year 0,
the firm would focus on the construction of a  building to house state-of-the-art batch still
equipment.  During Year 1, the firm would complete the construction of the building, purchase
and install the distillation equipment, hard-pipe the new system to the manufacturing lines, train
personnel in the operation of the still, and perform start-up runs and quality control tests.


Year 0 Investments

The first step in the project is the construction of the building to house the batch still.  It is
assumed that, at the end of Year 0, the firm completes 75% of the necessary construction.
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 Construction Costs - Inv. Year 0
 At the end of Year 0, the firm completes approximately 75% of the new building and supporting
 facilities to house the batch still at a cost of $1,057,500. The firm depreciates this cost over 31.5
 years using the Straight Line (SL) Depreciation Method.  The firm defines the Lifetime of the
 building as 50 years.
 Engineering and Planning Costs - Inv. Year 0
 The facility hires an outside engineering firm to take responsibility for the primary construction
 of the building.  These engineering services at the end of Year 0 total $399,000, and also are
 depreciated over 31.5 years using the Straight Line (SL) Depreciation Method.  Because these
 engineering services are required for construction of the building, they have the same Lifetime of
 50 years.
 Year 11nvestments

In Year  1, the facility completes the construction of the building and purchases the batch still
solvent recovery equipment.  The new system is  hard  piped to  the  existing manufacturing
processes and trial runs are performed.
Construction Costs - Inv. Year 1
The firm finishes the remaining construction of the new building and supporting facilities to
house the batch still for $352,500.  The firm depreciates this cost over 31.5 years using the
Straight Line (SL) Depreciation Method. Again, the Lifetime of the building is 50 years.


Engineering and Planning Costs - Inv. Year 1
The firm completes remaining engineering and planning tasks with in-house labor for a cost of
$157,500 at the end of Year 1.  These engineering and planning labor costs are depreciated over
31.5 years using the Straight  Line (SL) Depreciation Method.   Because these engineering
services are required for construction of the building, they have the same Lifetime of 50 years.


Purchased Equipment Costs - Inv. Year 1
Operation  of the  solvent recovery  system  requires several   different  types  of major
equipment—distillation vessels, odor abatement equipment, a molecular sieve unit, and storage
tanks, heat exchangers. The firm also must purchase piping materials, valves (e.g., relief valves),
instruments  (e.g., flow meters, pressure gauges), and other special items  (e.g., flame ancestors).
These items cost a total of $853,500 and are depreciated using the Depreciation Method and
Depreciation Period of DDB over 5 years. This equipment has an estimated Lifetime of 15 years
and a Salvage Value at the end of that Lifetime of $50,000.
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P2/FINANCE Version 3.0
Case Studies
Equipment Installation Costs - Inv. Year 1
Equipment installation requires $770,250 of contractor  labor  and is  depreciated  using the
Depreciation Method and Depreciation Period of DDB over 5 years.

Training Costs - Inv. Year I
The firm sends three operators to a free one-week,  on-site training session offered by the
equipment manufacturer.  The cost of their time equals $5,250.  This Initial Investment Cost is
also expensed using the EXP Depreciation Method.
Engineering Costs - Equipment-Inv. Year 1
The final testing of the equipment requires both in-house and contract engineering expertise
towards the end of Year 1. In-house engineering costs $247,500.  Contractor engineering costs
$232,500. Both are depreciated using DDB over 5 years.
Annual Operating Costs

The batch still begins operations at the very end of Year 1.  Therefore, the firm assumes the
business-as-usual Annual Operating Costs for Year 1, and includes the Annual Operating Costs
associated with the batch still for Years 2-12.  In addition, the firm must take into account the
fact that Product X will be manufactured at the facility beginning in Year 2.

The batch still system lowers the  annual costs of virgin  raw materials, vendor  disposal,
maintenance of vendor relationships,  and waste manifesting at the facility.  Concurrently, the
system increases the cost  of utilities, direct operating  labor, permit fees,  and miscellaneous
supplies.
Start Year 1 Annual Operating Costs

These costs mirror the business-as-usual costs defined in the Base Scenario, because the batch
still system is still under construction during Year 1.
Virgin Raw Materials - Start Year 1
The purchase of a batch still recovery system would reduce virgin solvent purchase costs by
allowing recovery and recycle of solvents within the facility.  Purchasing records indicate that
virgin raw materials for the manufacture of Product A cost $234,000 annually in the business-as-
usual Base Scenario.  The annual purchase cost for Product B virgin raw materials is $157,000.
These costs apply only to Year 1.
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Vendor Disposal - Start Year 1
The purchase of a batch still recovery  system would impact the  off-site waste disposal and
treatment costs for each of the product lines.  The environmental engineer goes to the facility's
waste manifest records to determine that, under the business-as-usual Base Scenario, Product A
has an annual off-site disposal cost of $104,000.  Product B has an annual off-site disposal cost
of $283,000.  Because the vendor disposal costs for both products are expected to rise at a rate
higher than inflation, the environmental engineer defines an Escalation Rate of 2.0%.   These
costs apply only to Year 1.


Manifesting Labor - Start Year 1
The preparation of hazardous waste shipment manifests for the waste from the two product lines
requires in-house labor. The environmental staff member responsible for this task estimates that
manifesting for  Product  A  requires approximately 22 hours per year of his  time, while
manifesting for Product B requires about 50 hours per year.  For a fully burdened (i.e. benefits
included) labor costs  of $44 per hour, this corresponds to an annual cost of $968 for Product A
and $2,200 for Product B. These costs apply only to Year 1.


Maintenance of Vendor Relationships - Start Year 1
Under the business-as-usual Base Scenario, the head of the  facility's Purchasing Office  spends
about 10  days per year maintaining the firm's relationships with multiple waste disposal and
treatment vendors through contract negotiations and site visits.  At a labor cost of $55 per hour
(including benefits), this translates into a total annual cost of $4,400.  This activity also requires
$2,000 hi travel costs  for the site visits. These costs apply only to Year 1.
Start Year 2 Annual Operating Costs

These  costs relate to Products A, B,  and X being  on-line,  with the batch  still in place  and
operational.
Virgin Raw Materials - Start Year 2
With the batch still, the facility will reduce its virgin raw material purchase costs because the
solvents recovered by the distillation system can be reused as raw materials in the manufacturing
process. Reduced annual virgin raw material costs for Product A are estimated to be $35,100.
For Product B the estimate is $23,500. When Product X is first manufactured in Year 2, the first-
year virgin raw material cost will be $414,000 as it would be in the absence of a solvent recovery
still.  These costs apply only to Year 2.
Vendor Disposal - Start Year 2
With the batch still, the facility will reduce its waste disposal vendor costs to $15,600 for Product
A, $42,450 for Product B, and $129,300 for Product X. Again, because the vendor disposal costs
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P2/FINANCE Version 3.0
Case Studies
for both products are expected to rise at a rate higher than inflation, the environmental engineer
defines an Escalation Rate of 2.0%.  These costs apply to Years 2-15.
Manifesting Labor - Start Year 2
With the batch still, the facility also will reduce its annual internal labor costs associated with
waste manifesting to $145 for Product A, $330 for Product B, and $660 for Product X.  These
costs apply to Years 2-15.


Utilities - Start Year 2
The batch still requires steam, electricity and nitrogen gas at an additional cost of $15,000 per
year. This cost applies to Years 2-15.


Direct Labor - Start Year 2
One and a half operators are needed to run the batch still at an annual direct operating labor cost
of $95,000.  This cost applies to Years 2-15.


Recycling Permit Renewal - Start Year 2
The batch still will require the annual renewal of a recycling permit, a task of two days per year
at a fully burdened cost of $880 per year. This cost applies to Years 2-15.


Maintenance of Vendor Relationship - Start Year 2
Because the batch still will reduce reliance on external waste disposal vendors, its purchase
would reduce the total cost for inspections and contract negotiations to about $2,000 per year.
This cost applies to Years 2-15.
 Start Year 3 Annual Operating Costs
 Virgin Raw Materials - Start Year 3
 The reduced annual virgin raw material costs for Product A will continue to be $35,100. For
 Product B they will continue to be $23,500. For Product X, they will fall to only  $62,100. These
 costs apply to Years 3-15.
                                         4-35

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 P2/FINANCE Version 3.0
Case Studies
 Enter the Financial Parameters

 Having collected all of the relevant cost data for the analysis, the environmental engineer enters
 the data into P2/FINANCE. On the Project Title sheet, she enters Batch Still Solvent Recovery
 as the Project Title and other general information about the analysis.

 Default Parameters for the Analysis

 The environmental engineer opens the Default Parameters sheet of P2/FINANCE  by typing
 AIH-G, D.  To define the Global Parameters for the analysis, the environmental engineer goes to
 the facility controller for advice on Inflation Rate, Discount Rate, default Depreciation Method,
 and default Depreciation Period.  The controller recommends an analysis Inflation Rate of 3%.
 To correspond with this  Inflation Rate, he recommends a Discount Rate of 18% in the analysis.
 The controller assumes  that the investment would not alter the facility's current Income Tax
 Rates, which equal 32.5% for Federal, 8% for State, and 0% for Local, giving an Aggregate
 Income Tax Rate of 37.9%.  Although the Depreciation Method and Depreciation Period used for
 Initial Investment Costs  will vary by category for this complex analysis, the controller selects
 DDB as the default Depreciation Method and 5 as the default Depreciation Period.

 As Scenario Parameters, the environmental engineer defines the Name, Initial Investment Year,
 and Lifetime for each scenario.  Alternative Scenario 1, Batch Still Recovery System, has a
 default Investment Year of 0 and a default Lifetime of 15.  Base Scenario, Off-Site Waste
 Disposal and Treatment, has a default  Investment Year of 0 and a default Lifetime of 15.  The
 Lifetime of 15 years is the project Lifetime customarily chosen by this large firm for projects of
 this size, as recommended by the facility controller.

 After entering these data on the Default Parameters sheet, the environmental engineer presses
 Alt+D to apply these parameters to all cost categories on the Initial Investment Costs and Annual
 Operating Costs sheets.
Enter the Cost Data
Initial Investment Costs sheet

The environmental engineer opens the Initial Investment Costs sheet by typing Alt+G, I. In the
Initial Investment Costs sheet, the manager moves to the Alternative Scenario 1 section of the
sheet by typing Alt+C, 1.  In this scenario, she modifies the cost category titles to reflect the cost
data  for the  analysis.  She defines the following nine Initial Investment Cost categories:
Construction (Inv. Year 0), Engineering and Planning (Inv. Year 0), Construction (Inv.
Year 1), Engineering and Planning (Inv. Year 1),  Purchased Equipment (Inv.  Year 1),
Equipment Installation (Inv.  Year 1), Training (Inv. Year 1), and Engineering Costs  -
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P2/FINANCE Version 3.0
Case Studies
Equipment (Inv. Year 1).  She then deletes all of the remaining default cost category titles on
the sheet. Because the names of the Initial Investment Cost categories must remain consistent
through the scenarios within a project, P2/FINANCE automatically copies these cost category
titles to the other scenarios.

Starting in Alternative Scenario 1, the environmental engineer inputs a brief description of the
cost items within each Initial  Investment Cost category.   For example, under  Purchased
Equipment (Inv.  Year 1), she defines the cost item,  Distillation vessels, odor  abatement
equipment, molecular sieve unit, storage tanks, heat exchangers, piping materials, valves,
instruments, etc.  For each cost item,  she inputs the cost developed through her earlier data
collection efforts.  Where necessary, she modifies the parameters for that cost category.  For
example, under Construction (Inv.  Year 0), she types an entry for Construction of building
(75%) and enters a cost of $1,057,500. She changes the default Depreciation Method to SL and
the default Depreciation Period to 31.5.   She also changes the Lifetime of the investment to 50
years.

After finishing data  input related to the Alternative Scenario  1, the environmental engineer
moves to the Base Scenario by typing Alt+C, B.  The Base Scenario does not require any initial
investment because it reflects the shop's current  off-site waste disposal arrangement. To  make
this clear,  she types a  brief note  in each cost category indicating that there are no Initial
Investment Costs and inputs a $ value of 0. For example, for the Equipment Installation (Inv.
Year 1) cost category, she types No equipment installation and inputs $0 as the cost.
Annual Operating Costs sheet

The environmental engineer opens the Annual Operating Costs sheet by typing Alt+G, O.  Once
in the sheet, she moves to the section for Alternative Scenario 1 by typing Alt+C,  1. In this
scenario, the environmental engineer modifies the cost category titles to reflect the cost data for
the analysis.  She defines the following twelve Annual Operating Cost categories: Virgin Raw
Materials (Start Year 1), Vendor Disposal (Start Year 1), Manifesting Labor (Start Year 1),
Maintenance of Vendor Relationships (Start Year 1), Virgin Raw Materials (Start Year 2),
Vendor Disposal (Start Year 2), Manifesting Labor (Start Year 2), Utilities (Start Year 2),
Direct Labor (Start Year 2), Recycling Permit Renewal (Start  Year 2), Maintenance  of
Vendor Relationship (Start Year 2), and Virgin  Raw  Materials  (Start Year 3).   She then
deletes all of the remaining default cost category titles on the sheet.  -Because the names of the
Annual Operating Cost categories must remain consistent through the scenarios within a project,
P2/FINANCE automatically copies these cost category titles to the other scenarios.

Starting in Alternative Scenario 1, the environmental engineer inputs a brief description of the
cost items within each Annual Operating Cost category^  For example, under  Maintenance of
Vendor Relationships  (Start Year 1), she defines the  cost items, Internal labor costs and
Travel costs. Where necessary, she modifies the parameters for the cost category. For each cost
item, she inputs the cost developed through her  earlier data collection efforts.  For example,
                                       4-37

-------
 P2/FINANCE Version 3.0
Case Studies
 under Virgin Raw Materials (Start Year 1), she types an entry for Product A raw materials
 with a cost of 5234,000 and Product B raw materials with a cost of $157,000.

 After finishing data input related to the Alternative Scenario 1, she moves to the Base Scenario
 by typing Alt+C, B.  In the Base Scenario, she inputs a description of the cost items within each
 Annual Operating Cost category and for each cost item, inputs the dollar value of the cost. For
 example,  under  Manifesting Labor (Start Year 1),  she  defines  a  cost item,  Product A  -
 internal labor with a cost of $968 and Product B - internal labor with a cost of $2,200.
 Generate Reports

 Having completed all of the necessary data entry, the environmental engineer reviews the four
 reports, that P2/FINANCE develops.

 Scenario Summary sheet

 The environmental engineer opens the Scenario Summary sheet by typing Alt+G, S.  She first
 checks the accuracy and completeness of the data she just entered by moving to the Alternative
 Scenario 1 section of this sheet by typing Alt+C, 1.  To make any changes to the data for this
 scenario, she types Alt+G, and selects either I for the Initial Investment Costs sheet or O for the
 Annual Operating Costs sheet.  P2/FINANCE automatically moves you to the same scenario in
 which you were working hi the Scenario Summary  sheet.  For example,  if you are in the
 Alternative Scenario 1 section of the Scenario Summary sheet and you choose to open the Initial
 Investment Costs sheet, P2/FINANCE automatically moves you to  the Alternative Scenario 1
 section of the Initial Investment Costs sheet.

 After reviewing the contents of Alternative Scenario 1, the environmental engineer moves to the
 Base Scenario by typing Alt+C, B. Here, she checks the accuracy and completeness of the Base
 Scenario.
Tax Deduction Schedule sheet

To open the Tax Deduction Schedule sheet, the environmental engineer types Alt+G, T. Once
inside the sheet, she moves to the Alternative Scenario 1 section by typing Alt+C, 1.  Here, she
reviews the depreciation calculations related to the batch still investment.  Because the Base
Scenario  does not require an investment, she does not review the Base Scenario section of this
sheet.
                                     4-38

-------
P2/FINANCE Version 3.0
Case Studies
Incremental Cash Flow Analysis sheet

To open, the Incremental Cash Flow Analysis sheet, the environmental engineer types Alt+G, C.
Once inside the sheet, she moves to the section that reflects the comparison of the Alternative
Scenario 1  and the  Base Scenario  by typing Alt+C,  1.  Here  she reviews the impact the
investment would have on the firm's cash flows. She focuses on the Tax Calculation and the
Cash Flow Calculation at the bottom of the sheet.
Incremental Profitability Analysis sheet

To open the Incremental Profitability Analysis sheet, the environmental engineer types Alt+G,
A. In this sheet, she inputs an optional time horizon of 12 years over which she can evaluate the
profitability of the investment.  She then uses all three profitability indicators to determine
whether the shop should invest in the Batch Still Solvent Recovery Project.
Summary of Results

The environmental engineer reviews the profitability indicators associated with this investment.
The investment does not meet the firm's usual investment criteria because its IRR during the
time horizon from Year 0 to Year 5 is less than the firm's Discount Rate.

However, the engineer has not included the potential reduction in liability associated with the
investment in the  quantitative analysis and believes that^these additional cost savings may
improve the project's desirability to upper management.  Therefore,  she includes a thorough
qualitative discussion of relevant liability issues in the quantitative report that she submits to the
firm's Vice President of Manufacturing.

The Vice-President of Manufacturing,  after review of the quantitative analysis and discussions
with the environmental engineer, the  firm's legal and purchasing staff, and the production
manager, approves the Batch Still Solvent Recovery project. The staff widely recognize that the
potential avoided liability and the long-term inherent production flexibility (i.e., the ability to
treat new product waste streams on-site) of the Batch Still Solvent Recovery project adds value
to the borderline  quantitative profitability of the  project and  makes it a justifiable,  sound
business-decision.
                                       4-39

-------

-------
P2/FI NANCE
Version 3.0
                                                                                Title-pg1
Date: 9/1/96
 PROJECT TITLE:
                        Batch Stiff Solvent Recovery
PREPARED BY;
                         Environmental Engineer
 ORGANIZATION:
                        Chemicals Manufacturer
 COMMENTS:
                        This analysis does not quantify the potential Ifabiiity cost savings associated with
                        the purchase of a batch stilt solvent recovery system. A qualitative discussion of
                        poteniiai liability savings refated to the project appears under separate cover.
                                          P2/FINANCE

                               Pollution Prevention Financial Analysis
                                   and Cost Evaluation System

                                           Version 3.0
                                         Copyright 1996
                                          Tellus Institute
                                           Boston, MA

-------
DEFAULT PARAMETERS
Analysis Mams: Batch Still Solvent Recovery Date: 9/1/96 Default-pg1
Global Parameters
P2/FINANCE uses the Inflation Rate, Discount Rate, and Income Tax Rate
entered here for calculations on the Tax Deduction Schedule, Incremental
Cash Flow Analysis, and Incremental Profitability Analysis sheets.
Inflation reflects the overall rate at which you expect prices to increase.
For cases in which this Inflation Rate does not fully capture expected
price changes, P2/FINANCE allows you to define an additional
Escalation Rate for each Annual Operating Cost category.
Inflation Rate : 3.0%-
The Discount Rat* accounts for the fact that there is an opportunity
cost to using money — if you choose to invest in one project, you
lose the opportunity to gain a return on another investment. Many
companies use their weighted average cost of capital as a Discount
Rate, For more information on Discount Rate and its relationship to
Inflation, see the on-line help.

Discount Rate ; *'; ; .: ; 1 8:0% |
State and local income taxes are deductible from the taxable income
used to calculate federal taxes. Enter your Local, State, and
Federal Income Tax Rates below, and P2/FINANCE will calculate an
Aggregate Income Tax Rate.
Local Income Tax Rate , : . ; O.Q%:
State Income Tax Rate ' •-;"• 8.0%:
Federal Income Tax Rate : - 3215%'



Aggregate Income Tax Rate 37.9% I


||| 	 tjfe,aii Sf ffipf?- **$*$$*% 1&«M««?U# thte*«ctfo»
1 R,S,,uf i^jjL^ji^ptowj you are *ur«t tfeat yow WSW&I&JMS-
s«tM*wiPli&r! 	 "i:"" "" " " " ' - "


P2/FINANCE uses the Depreciation Method and Period entered here as
defaults for all Initial Investment Costs. You can change the
Depreciation Method and Period for individual categories on the Initial
Investment Costs sheet.
Depreciation Method DDB :
Depreciation Period •••••.••:••';> 5.05
For Depreciation Method, use one of these abbreviations:
5 Straight Une Sl_
« 1 50% Declining Balance switching to Straight Line 1 .5DB
* 200% Declining Balance switching to Straight Line DDB or 2DB
j Expensed (tax deductible in the first year) EXP
1 Wor king Capital (not tax deductible) WC



3m jwjfape pjjftafl^efs SB*^' ^ w y&$m '^^^mmK' ••
i|irt.;&g.a|3pl»ed to.iJhe^nitir^projepUife?- %;pffiS»Hi|'"ALT-f?D;"
V$ ^\t^A&*&w$^x*i9*w#--sfo# m^im'm^^^ -:
•*atee§*-"tei afcrtftfi , 1 >/-,• / '";'"' ' , ' '\: '< s / "," ,- - * }- j
Scenario Parameters
P2/FINANCE allows ypu to create two alternative financial analysis
scenarios, which represent different investment options you are
considering. You also can create a baseline scenario, which
contains data on your current "business-as-usual" operations. On
the Incremental Cash Flow Analysis and the Incremental Profitability
Analysis sheets, the Alternative Scenarios are compared to the Base
Scenario, i.e., P2/FINANCE calculates incremental cash flows and
profitability.
The Investment Year and Lifetime entered here are used as defaults
for both Initial Investment Costs and Annual Operating Costs.
P2/FINANCE assumes that investments occur AT THE END OF THE
INVESTMENT YEAR, so the default Start Year for Annual Operating
Costs is Investment Year + 1. The most common Investment Year
will be Year 0, i.e., most Initial Investment Costs are incurred at the
very beginning of the project lifetime.
Alternative Scenario 1
Name
I .Batch Still' Recovery System :5 ;; v;,;:;;

Inv.Yearl 0| Lifetime I 15|

Start Year I 1| End Year I 15 1

Alternative Scenario 2
Name


Inv.Yearl 0| Lifetime \ ' ' 15 1

StartYearl 1| EndYearl 15|

Base Scenario
Name
I Off-Site Waste Disposal and Treatment ••:.-•••• : ; : ; ;•: ; ; : : ;; ; ; :

lnv.Year|. 0| Lifetime 
-------
INITIAL INVESTMENT COSTS - Alternative Scenario 1
Alternative Scenario 1 : Batch Still Recovery System Date: 9/1/96 Inv-Altl-oal
Initial Investment Costs
S Amount Initial Investment Costs
Construction (Inv. Year 0)
Dep. Method
Dep. Period
SL
31.5
Investment Year
Lifetime
Construction of building (75%)


,

.

J
j
>
f
Salvage Value
Constructior
Dep. Method
Dep. Period

i (Inv, Year 1)
SL
31.5
TOTAL
0
50
$1,057,500








$1,057,500

$ Amount
Engineering and Planning (Inv. Year 0)
Dep. Method SL
Dep. Period
Investment Year
31.5 Lifetime
Outside engineering for building construction
•
,


,

.
,
Salvage Value | :
TOTAL
0
50
$399,000








$399,000
i
Engineering and Planning (Inv. Year 1) "
Investment Year
Lifetime
Remaining construction of building (25%)

<

,

Salvage Value
Purchased E
Dep. Method
Dep. Period
:
TOTAL
1
50
5352,500
••
'



$352,500
guipment {Inv. Year 1}
DOB
5.0
Investment Year
Lifetime
Distillation vessels, odor abatement equipment molecular
sieve unit storaae tanks, heat exchangers, piping
materials, valves, instruments, etc.
j~. f fi

Salvage Value
| Training (Inn
Dep. Method
Dep. Period
$50,000 1 TOTAL
, Year 1)
EXP
0.0

Investment Year
Lifetime
Cost of fimetfor three operatols to attend-free one—week
on -site training session
! f

Salvage Value
Dep. Method
Dep. Period


DDB
5.0
TOTAL
Investment Year
Lifetime

,

Salvage Value


TOTAL
1
15
$853.500




$853.500

1
15
$5,250


'
$5,250

0
15



$0


Dep. Method SL
Dep. Period
Investment Year
31v5 Lifetime
In- house labor





Salvage Value I:
TOTAL
1
50
$157,500





$157,500
Equipment Installation (Inv. Year 1)
Dep. Method ODB;
Dep. Period
Investment Year
5.0 Lifetime
Contractor tabor




Salvage Value
Engineering Costs
Dep. Method DDB
Dep. Period
In —house engineering
TOTAL
1
15
$770,250




$770,250
— Equipment (Inv. Year f)
Investment Year
.5iO: Lifetime

Contractor engineering

; ,,
Salvage Value h

Dep. Method DDB
Dep. Period

•:\ TOTAL
1
15
' $247,500
$232.500

,
$480,000

•I Investment Year
•S.O'I Lifetime


•w
Salvage Value

•I TOTAL
0
15


, %
$0


-------
...,.., : -;;::.•".:••
Dtp. Method
Dtp. Ptftod

DOS
5.0
Investment Year
Lifetime


.•


SahmgeValuel

Dtp. Method
Dep. Ptftod


DOB
5.0
TOTAL
Investment Year
Lifetime


.' . , ' • '•<:''• l

S*Jvig» Value


TOTAL
0
15





$0

0
15




SO


lrtv-Att1-pg2
Dep. Method
Dep. Period

DDB
5.0
Investment Year
Lifetime




•
Salvage Value
Dep. Method
Dep. Period
' :

DDB
:. • ' ••..-: .5.0
";*••,;.. i;.,
TOTAL
Investment Year
Lifetime




Salvage Value
• • '

TOTAL
, 0
15

t

-
-
$0
- ,
0
15

, *


$0


-------
INITIAL INVESTMENT COSTS - Base Scenario
Base Scenario: Off-Site Waste Disposal and Treatment Date: 9/1/96 - . lnv-Base-oa1
Initial Investment Costs
$ Amount Initial Investment Costs S Amount
Construction (Inv. Year 0)
Dep. Method DDB
Dep. Period
Investment Year
:5:0: Lifetime
No construction
'
f "!• *.

,. ,
j
* :•/,' '' '
-. ;
, % f"< „
Salvage Value (:
TOTAL
a
15
so-







' '
$0

Construction (Inv. Year 1)
Dep. Method DDB
Dep. Period
Investment Year
:::5;0: i Lifetime
No construction

f

' i
, -,-, ,. ..
Salvaqe Value t
TOTAL
1
15
sa





so

Purchased Equipment (Inv. Year 1)
Dep. Method :DDB;
Dep. Period
Investment Year
5.0 Lifetime
No purchased equipment
' ..
I s ^ 4. , „
•"
..
Salvage Value H:
TOTAL
T
15
€0




$0

| Training (Inv. Year 1)
Dep. Method DDB
Dep. Period
Investment Year
:;5i0: Lifetime
No training . *•
' - ' VTOI
•, - •-

Salvage Value 1

Dep. Method DDB
| Dep. Period
TOTAL
1
15
$0



so

Investment Year
:5;0 Lifetime
-
. - '
, , ,
Salvaqe Value

TOTAL
r>
15:



SO


Engineering and Planning (Inv. Year 0)
Dep. Method DDB ^ Investment Year
Dep. Period 5.0 Lifetime
No engineering or planning :
s






t ^ ^ ^ •. ^
Salvage Value! TOTAL
0
IS
$0






_.

$0
Engineering and Planning (Inv. Year 1)
Dep. Method DDB Investment Year
Dep. Period 5.0 Lifetime
No engtneerTng or planning



*•"
^ ••
Salvaqe Value | TOTAL
1
15:
SO

,



SO
Equipment Installation (Inv. Year 1)
Dep. Method DDB Investment Year
Dep. Period 5.0 Lifetime
No equipment installation

v.:
•"

Salvage Value I TOTAL
1
15
SO




so
Engineering Costs — Equipment (Inv. Year 1)
Dep. Method DDB Investment Year
Dep. Period 5.0 Lifetime
No engineering —equipment



Salvaqe Value I TOTAL
1
15
•so
.,


so

Dep. Method DDB Investment Year
Dep. Period 5.0 Lifetime


'
Salvage Value I TOTAL
0
15



SO


-------

D«p. Mithod
Dtp, Period


DOB
5.0
Investment Year
Lifetime

"! 1



Sarvaa*V*tiwt
!
D«p. Mtthod
D«p, Pwlod

DOB
5.0
TOTAL
Investment Year
Lifetime


nf

S« j\ij« V*lu*


TOTAL
0
15





$0

O
15




SO


lnv-Base-pg2
Dep. Method
Dep. Period
DDE
5.0
Investment Year
Lifetime
• " ft
t




Salvage Value i

Dep. Method
Dep. Period

DDE
;5.0
TOTAL
Investment Year
Lifetime
'


••< '
Salvage Value


TOTAL
0
15
, '
-,



$0

0
15



<
$0


-------
ANNUAL OPERATING COSTS - Alternative Scenario 1

Alternative Scenario 1 ' Batch Still Recovery Svstem Date:9/1/96 • OD— Altl— pal
Annual Oceratinq Costs S Amount Annual Operating Costs S Amount
I Virgin Raw Materials (Start Year 1)
Escalation Rate f 0.0% | Start Year
End Year
Product A raw materials
Products raw materials - -
f

--*, '

i

,
TOTAL
Manifesting Labor (Start Year 1)
Escalation Rate f 0.0% I Start Year
End Year
In-house preparation for shipment of waste Product A
In-house preparation for shipment of waste Product &

*
j •• ,
j
TOTAL
| Virgin Raw Materials (Start Year 2)
Escalation Rate I 0.0% I Start Year
End Year
Product A raw materials
Product B raw materials
Product X raw materials
•-
'
TOTAL
| Manifesting Labor (Start Year Z)
Escalation Rate f 0.0% I Start Year
End Year
In-house preparationfor shipment of Product A
In —house preparation for shipment of Product B
In-house preparation for shipment of ProductX >
'
TOTAL
| Direct Labor (Start Year Z)
Escalation Rate I 0.0% I Start Year
End Year
1 .5 operators to run the batch stilt
!_.

TOTAL
1
1
$234,000
$157,000

-





$391,000

1
1
$968
32,200




$3.168
<_
2
2
$33,100
323,500
$414,000


$472,600

2
15
$145
$330
$660

$1.135

2
15
595,000


$95.000


Vendor Disposal (Start Year 1)
Escalation Rate | ' 2.0% | Start Year
End Year
Product A off-site disposal ;
Products off-site disposal


'


,

TOTAL
Maintenance of Vendor Relationships (Start Year 1]
Escalation Rate I 0.0% I Start Year
End Year
Infernal labor
Travel

, ,

,
TOTAL
Vendor Disposal (Start Year 2)
Escalation Rate I • •: • : * •••. . . ••-. ••••, 2:0% I Start Year
End Year
Product A off-site disposal
Product B off-site disposal
ProductX off-site disposal


TOTAL
Utilities (Start Year Z)
Escalation Rate I 0.0% 1 Start Year
End Year
Steam, electricity, and nitrogen gas



TOTAL
Recycling Permit Renewal (Start Year 2}
Escalation Rate! 0.0% j Start Year
End Year
Two days of work/year to renew permit
i _

TOTAL
1
1
$tQ4,OOQ
5283,000







$387,000

1
'1
$4>40r>:
32,000




$6,400

2
15
$15,600
$42i450:
St29,300


$187,350

Z
15
$15,000



$15.000

2
15.
S8BO


$880


-------
I M«Jrrt«n«nc« of Vendor Relationships (Start Y««r £
EtcataibnRatej 0,0% | Start Year
End Year
Btduoed total co«t




TOTAL

EK*!atbnrUt*l 0,0%l Start Year
End Year



. ^
TOTAL

(:
2
15
$2,000;

*
^

$2,000
I ,
1
15
'

1 !

$0



















Virgin Raw Materials (Start Year 3)
Escalation Rate|, 0.0% | Start Year
End Year
Product A raw materials
Product Brawmaterials
Product Xrawmateriab


TOTAL

Escalation Rate f 0.0% 1 Start Year
End Year




TOTAL

Op-AJt1-pg2
3
15
$35,100
$23,500
S62.100
•• '
-
$120,700

1
15

,


$0


-------
ANNUAL OPERATING COSTS - Base Scenario
mm^mm&^^m^iMmi^mi^^^i^^^^i^imi^M^iM
Base Scenario: Off— Site Waste Disoosal and Treatment
- -•
Date: 9/1/96 Oo-Base-pa1
Annual Operating Costs $ Amount Annual Operating Costs $ Amount
| Virgin Raw Materials (Start Year 1)
Escalation Rate f 0.0%] Start Year
End Year
Product A raw materials
Product B raw materials
^ ..

'.••
, -, ~
; •••.-., "
•><•
'
TOTAL
Manifesting Labor (Start Year 1)
Escalation Rate t 0.0% I Start Year
End Year
In-house preparation for shipment of waste Product A
In-house preparation for shipment of waste Product B:
,
•• " ',-. ,-.
f f ff
;• •
TOTAL
I Virgin Raw Materials (Start Year 2)
Escalation Rate I 0.0% { Start Year
End Year
Product X raw materials
„ „
*-


TOTAL
Manifesting Labor (Start Year 2)
Escalation Rate I 0.0%| Start Year
End Year
Cost increase associated with Product X
, .. ,
'

TOTAL
Direct Labor (Start Year 2)
Escalation Ratef^.:--:.:::XS.:.v.^Sa<»ft;| StartYear
End Year
No operators to run batch still
... . '•.:'-'.-. • ' >„
••':•••'••....• ; '..
TOTAL
1
15
5234,000-
5157,000


-
^ *!*



$391,000

1
1S
S96S
S2,2oa

' -

j
$3.168

2
' 1&
5414,000




$414,000

2
15
$3.500
••


$3.500

2
15
SO


SO


Vendor Disposal (Start Year 1)
Escalation Rate I 2,0% 1 StartYear
End Year
Product A -off-site disposal
Product B off-site dfeposa!



,
"

•• f f
TOTAL
Maintenance of Vendor Relationships (Start Year 1)
Escalation Rate I 0.0% I StartYear
End Year
In- house labor
Travel


-
•
TOTAL
Vendor Disposal (Start Year 2)
Escalation Bate I 2.0% I StartYear
End Year
Product X off-site disposal
'



TOTAL
Utilities (Start Year 2)
Escalation Rate! 0.0%) StartYear
End Year
No batch still requiring extra utilities



TOTAL
Recycling Permit Renewal (Start Year 2)
Escalation Rate! 0.0% 1 StartYear
End Year
No recycling permit

.,
TOTAL
1
15
$404,000
$283,000
,



f
-.-..

$387,000

> 1
15
$4,400
S2.00O




$6.400

2
15
$862,000
'



$862,000

2
15
SO



$0

2
15
$0


$0


-------
I Maintenance of Vendor Relationships (Start Year 2]
Escalation Rat* | 0.0% | Start Year
End Year
Cost Incr«at» associated with Product X




TOTAL

EwalationRatof 0,0%| Start Year
End Year




TOTAL


2
15
$4,000




$4.000

1
15




SO



















Virgin Raw Materials (Start Year 3)
Escalation Rate |: : : ;0.0%| Start Year
End Year
No new;oisdrfferent raw materials ;costs
'



TOTAL

Escalation Rate | ; 0.0% I Start Year
End Year




TOTAL

Op-Base-pg2
3
15
90
j •
_, _,
*,"**
f
$0

1
15




$0


-------
SCENARIO SUMMARY - Alternative Scenario 1
Alternative Scenario 1 : Batch Still Recovery Svstem Date: 9/1/96

INITIAL INVESTMENT COSTS
Construction (Inv. Year 0)
Engineering and Planning (Inv. YearO)
Construction (Inv. Year 1)
Engineering and Planning (Inv. Year 1)
Purchased Equipment (Inv. Year 1)
Equipment Installation (Inv. Year 1)
Training (Inv. Year 1)
Engineering Costs - Equipment (Inv. Year 1)






ANNUAL OPERATING COSTS
Virgin Raw Materials (Start Year 1)
Vendor Disposal (Start Year 1)
Manifesting Labor (Start Year 1)
Maintenance of Vendor Relationships (Start Year 1 )
Virgin Raw Materials (Start Year 2)
Vendor Disposal (Start Year 2)
Manifesting Labor (Start Year 2)
Utilities (Start Year 2)
Direct Labor (Start Year 2)
Recycling Permit Renewal (Start Year 2)"
Maintenance of Vendor Relationships (Start Year 2)
Virgin Raw Materials (Start Year 3)


GLOBAL PARAMETERS
Project Trtle: Batch Still Solvent Recovery
inflation Rate 3.0%
Discount Rate 18.0%
Aggregate. Income Tax Rate 37.9%
Default Depreciation Method DDB
Default Depreciation Period 5

Cost
$1,057,500
399,000
352,500
157,500
853,500
770,250
5,250
480,000
0
0
0
0
0
0
Cost
$391,000
387,000
3,168
6,400
472,600
187,350
1,135
15,000
95,000
880
2,000
120,700
0
0
Salvage
Value
$0
0
0
0
50,000
0
0
0
0
0
0
0
0
0
Summ-AM -Dd1
Depreciation
Inv. Year Lifetime
0
0
1
1
1
1
1
1
0
0
0
0
0
0
50
50
50
50
15
15
15
15
15
15
15
15
15
15
Start Year End Year














1
1
1
1
2
2
2
2
2
2
2
3
1
1
1
1
1
1
2
15
15
15
15
15
15
15
15
15
Period
31.5
31.5
31.5
31.5
5
5
0
5
5
5
5
5
5
5
Escalation
0.0%
2.0%
0.0%
0.0%
0.0%
2.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Method
SL
SL
SL
SL
DDB
DDB
EXP
DDB
DDB
DDB
DDB
DDB
DDB
DDB












































SCENARIO PARAMETERS













Default Investment Year
Default Lifetime
Default Start Year
Default End Year




















0
15
1
15


-------
SCENARIO
5t$t §£iQftfj°: OftxSiteJtoste Disposal and Treafrnent

INHTIAL INVESTMENT COSTS
Construction (Inv. Year 0)
Engineering and Planning (Inv. Year 0)
Construction (Inv. Year 1}
Engineering and Planning (inv. Year 1)
Purchased Equipment (Inv. Year 1)
Equipment Installation (Inv. Year 1)
Training (Inv. Year 1)
Engineering Costs — Equipment (Inv. Year 1)






ANNUAL OPERATING COSTS
Virgin Raw Materials (Start Year 1)
Vendor Disposal (Start Year 1)
Manifesting Labor (Start Year 1)
Maintenance of Vendor Relationships (Start Year 1)
Vkgfn Raw Materials (Start Year 2)
Vendor Disposal (Start Year 2)
Manifesting Labor (Start Year 2)
Utilities (Start Year 2)
Direct Labor (Start Year 2)
Recycling Permit Renewal (Start Year 2)
Maintenance of Vendor Relationships (Start Year 2)
Virgin Raw Materials (Start Year 3)


GLOBAL PARAMETERS
Project Tito: Batch Still Solvent Recovery
Inflation Rate 3.0%
Discount Rate 18.0%
Aggregate Income Tax Rate 37.9%
Default Depreciation Method DDB

SUMMARY
Date
- Base Scenario
9/1/96

Salvage
Cost Value Inv. Year Lifetime
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Cost
$391,000
387,000
3,168
6,400
414,000
862,000
3,500
0
0
0
4,000
0
0
0
$0 0
0 0
0 1
0 1
0 1
0 1
0 1
0 1
0 0
0 0
0 0
0 0
0 0
0 0
15
15
15
15
15
15
15
15
15
15
15
15
15
15
Start Year End Year
1
1
1
1
2
2
2
2
2
2
2
3
1
1
15
15
15
15
15
15
15
15
15
15
15
15
15
15
Sumrt


Depreciation
Period
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Escalation
0.0%
2.0%
0.0%
0.0%
0.0%
2.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
00%
Method
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB












































SCENARIO PARAMETERS







Default Investment Year
Default Lifetime
Default Start Year
Default End Year




















0
15
1
15


-------
TAX DEDUCTION SCHEDULE - Alternative Scenario 1
Alternative Scenario 1 : Batch Still Recovery System
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial -Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Construction (Inv. Year 0) (SL)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 0) (SL)
Initial, Investment Cost and Remaining Book Value
Construction (Inv. Year 1) (SL)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 1) (SL)
Initial Investment Cost and Remaining Book Value
Purchased Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Equipment Installation (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Training (Inv. Year 1) (EXP)
Initial Investment Cost and Remaining Book Value
Engineering Costs - Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Date: 9/1/96
0
1 ,456,500
0
0
1 ,456,500

1,057,500
399,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
2,692,163
5,408
0
2,697,570

16,786
1,040,714
6,333
392,667
0
363,075
0
162,225
0
879,105
0
793,358
0
5,408
0
494,400
0
0
0
0
0
0
0
0
0
0
0
0
23,119
0
0
23,119
2
0
0
0
0

33,571'
1,007,143
12,667
380,000
5,763
357,312
2,575
159,650
175,821
703,284
158,672
634,686
5,408
0
98,880
395,520
0
0
0
0
0
0
0
0
0
0
0
0
487,949
5,408
0
493,356
3
0
0
0
0

33,571
973,571
12,667
367,333
1 1 ,526
345,786
5,150
154,500
281,314
421 ,970
253,874
380,81 2
0
0
158,208
237,312
0
0
0
0
0
0
0
0
0
0
0
0
756,310
0
0
756,310
Tax-Altl -pg1
4
0
0
0
0

33,571
940,000
12,667
354,667
1 1 ,526
334,260
5,150
149,350
168,788
253,182
152,325
228,487
0
0
94,925
142,387
0
0
0
0
0
0
0
0
0
0
0
0
478,952
0
0
478,952
5
0
0
0
0

33,571
906,429
12,667
342,000
1 1 ,526
322,733
5,150
144,200
101,273
151,909
91 ,395
137,092
0
0
56,955
85,432
0
0
0
0
0
0
0
0
0
0
0
0
312,537
0
0
312,537

-------
TAX DEDUCTION SCHEDULE - Alternative
Alternative Scenario 1 : Batch Still Recovery System
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax'
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Construction (Inv. Year 0) (SL)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 0) (SL)
Initial Investment Cost and Remaining Book Value
Construction (Inv. Year 1) (SL)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 1) (SL)
Initial Investment Cost and Remaining Book Value
Purchased Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Equipment Installation (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Training (Inv. Year 1) (EXP)
Initial Investment Cost and Remaining Book Value
Engineering Costs — Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
] Total Tax Deductions
I
Scenario
1

Tax-Altl -pg2
6
0
0
0
0





33,571
872,857
12,667
329,333
11,526
311,207
5,150
139,050
101,273
50,636
91,395
45,697
0
0
56,955
28,477
0
0
0
0
0
0
0
0
0
0
0
0
312,537
0
0
312,537

7
0
0
0
0





33,571
839,286
12,667
316,667
11,526
299,681
5,150
133,900
50,636
0
45,697
0
0
0
28,477
0
0
0
0
0
0
0
0
0
0
0
0
0
187,726
0
0
187,726

8
0
0
0
0





33,571
805,714
12,667
304,000
11,526
288,155
5,150
128,750
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,914
0
0
62,914

9
0
0
0
0





33,571
772,143
12,667
291 ,333
11,526
276,629
5,150
123,600
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,914
0
0
62,914

10
0
0
0
0





33,571
738,571
12,667
278,667
11,526
265,102
5,150
118,450
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,914
0
0
62,914


-------
TAX DEDUCTION SCHEDULE - Alternative
Alternative Scenario 1 : Batch Still Recovery System
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Construction (Inv. Year 0) (SL)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 0) (SL)
Initial Investment Cost and Remaining Book Value
Construction (Inv. Year 1) (SL)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 1) (SL)
Initial Investment Cost and Remaining Book Value
Purchased Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Equipment Installation (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Training (Inv. Year 1) (EXP)
Initial Investment Cost and Remaining Book Value
Engineering Costs - Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Scenario
1

Tax-Altl -pg3
11
0
0
0
0





33,571
705,000
12,667
266,000
11,526
253,576
5,150
113,300
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,914
0
0
62,914
12
0
0
0
0





33,571
671,429
12,667
253,333
11,526
242,050
5,150
108,150
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,914
0
0
62,914
13
0
0
0
0





33,571
637,857
12,667
240,667
11,526
230,524
5,150
103,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
.62,914
0
0
62,914
14
0
0
0
0





33,571
604,286
12,667
228,000
11,526
218,998
5,150
97,850
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,914
0
0
62,914
15
0
0
0
0





33,571
570,714
12,667
215,333
11,526
207,471
5,150
92,700
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,914
0
0
62,914

-------
TAX DEDUCTION SCHEDULE - Base
Bass Scenario: Off- Site Waste Disposal and Treatment
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investartent Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Construction (Inv. Year 0) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 0) (DDB)
Initial Investment Cost and Remaining Book Value
Construction (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Purchased Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Equipment Installation (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Training (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering Costs - Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Scenario

Date: 9/1/96
0
0
0
0
0






0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
1
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
6
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0


Tax-Base-pg1
4
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION
Base Scenario: Off- Site Waste Disposal and Treatment
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs ;
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Construction (Inv. Year 0) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 0) (DOB)
initial Investment Cost and Remaining Book Value
Construction (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Purchased Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Equipment Installation (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Training (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering Costs — Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
SCHEDULE -
Base
Scenario


Tax— Base-pg2
6
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
0
0
, 0
0





0
0
0 .
0
0
0
0
0
0
0
0
0
0 .
0
0
0
0
0,
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
, 0
0
0

-------
TAX DEDUCTION SCHEDULE -
Base Scenario: Off-S'rte Waste Disposal and Treatment
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Construction (Inv. Year 0) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 0) (DDB)
Initial Investment Cost and Remaining Book Value
Construction (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Purchased Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Equipment Installation (Inv. Year 1} (DDB)
Initial Investment Cost and Remaining Book Value
Training (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering Costs - Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Base Scenario
Tax-Base-pg3
11
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
12
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Analysis Name: Batch Still Solvent Recovery
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Construction (Inv. Year 0)
Engineering and Planning (Inv. Year 0)
Construction (Inv. Year 1)
Engineering and Planning (Inv. Year 1)
Purchased Equipment (Inv. Year 1)
Equipment Installation (Inv. Year 1)
Training (Inv. Year 1)
Engineering Costs - Equipment (Inv. Year 1)






Total Initial Investment Costs
Date: 9/1/96
0

$1,057,500
399,000
0
0
0
0
0
0
0
0
0
0
0
0
$1,456,500
1

$0
0
363,075
162,225
879,105
793,358
5,408
494,400
0
0
0
0
0
0
$2,697,570
2

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
3

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
CashFlow-AIt1 -oa1
4

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
5

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
INCREMENTAL ANNUAL OPERATING (COSTSJ/SAVINGS
Virgin Raw Materials (Start Year 1)
Vendor Disposal (Start Year 1)
Manifesting Labor (Start Year 1)
Maintenance of Vendor Relationships (Start Year 1)
Virgin Raw Materials (Start Year 2)
Vendor Disposal (Start Year 2)
Manifesting Labor (Start Year 2)
Utilities (Start Year 2)
Direct Labor (Start Year 2)
Recycling Permit Renewal (Start Year 2)
Maintenance of Vendor Relationships (Start Year 2)
Virgin Raw Materials (Start Year 3)


Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
- Expensed Initial Investment Costs
+Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 37.9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
— Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
+ Salvage Value
After— Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow

























1,456,500


($1,456,500)
(1,456,500)
f$1 .456.500}
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
23,119
0
0
($23,119)
(8,762)

$0
(8,762)
2,697,570
0
0
($2,688,808)
(4,145,308)
($2.278.6511
$414,812
426,667
3,361
6,790
(62,169)
743,802
2,509
(15,914)
(100,786)
(934)
2,122
0
0
0
$1,420,261

$1,420,261
487,949
5,408
0
$926,905
351,297

$1,420,261
351,297
0
0
0
$1,068,964
(3,076,344)
$767.713
$427,256
448,001
3,462
6,993
452,389
780,992
2,584
(16,391)
(103,809)
(962)
2,185
(131,892)
0
0
$1,870,809

$1,870,809
756,310
0
0
$1,114,499
422,395

$1,870,809
422,395
0
0
0
$1,448,414
(1,627,930)
$881.549
$440,074
470,401
3,566
7,203
465,961
820,041
2,662
(16,883)
(106,923)
(990)
2,251
(135,849)
0
0
$1,951,513

$1,951,513
478,952
0
0
$1,472,561
558,101

$1,951,513
558,101
0
0
0
$1,393,412
(234,517)
$718.707
$453,276
493,921
3,673
7,419
479,939
861,043
2,742
(17,389)
(110,131)
(1,020)
2,319
(139,924)
0
0
$2,035,867

$2,035,867
312,537
0
0
$1 ,723,331
653,142

$2,035,867
653,142
0
0
0
$1,382,725
1,148,208
$604.402

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
^^IgJy^^JvJiJijei Batch Still Solvent Recovery
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Construction (Inv. Year 0)
Engineering and Planning (Inv. Year o)
Construction (Inv. Year 1)
Engineering and Planning (Inv. Year 1)
Purchased Equipment (Inv. Year 1)
Equipment Installation (Inv. Year 1)
Training (Inv. Year 1)
Engineering Costs - Equipment (Inv. Year 1)






Total Initial Investment Costs
CashFlow-Alt1 -Dd2
6

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
7

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
8

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
9

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
10

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
INCREMENTAL ANNUAL OPERATING (COSTSJ/SAVINGS
Virgin Raw Materials (Start Year 1)
Vendor Disposal (Start Year 1)
Manifesting Labor (Start Year 1)
Maintenance of Vendor Relationships (Start Year 1)
Virgin Raw Materials (Start Year 2)
Vendor Disposal (Start Year 2)
Manifesting Labor (Start Year 2)
Utilities (Start Year 2)
Direct Labor (Start Year 2)
Recycling Permit Renewal (Start Year 2)
Maintenance of Vendor Relationships (Start Year 2)
Virgin Raw Materials (Start Year 3)


Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
— Expensed Initial Investment Costs
•(•Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 37.9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
- Income Tax
— Initial Investment Costs
+ Recovery Of Working Capital
•f. Salvage Value
After— Tax Cash Flow
Cumulative Cash Flow
pjsconojejj Cash Flow
$466,874
518,617
3,783
7,642
494,338
904,096
2,824
(17,911)
(113,435)
(1,051)
2,388
(144,122)
0
0
$2,124,043

$2,124,043
312,537
0
0
$1,811,506
686,561

$2,124,043
686,561
0
0
0
$1 ,437,482
2,585,690
$532.489
$480,881
544,548
3,896
7,871
509,168
949,300
2,909
(18,448)
(116,838)
(1 ,082)
2,460
(148,446)
0
0
$2,216,218

$2,216,218
1 87,726
0
0
$2,028,493
768,799

$2,216,218
768,799
0
0
0
$1 ,447,420
4,033,109
$454.381
$495,307
571 ,775
4,013
8,107
524,443
996,765
2,996
(19,002)
(120,343)
(1,115)
2,534
(152,899)
0
0
$2,312,582

$2,312,582
62,914
0
0
$2,249,667
852,624

$2,31 2,582
852,624
0
0
0
$1 ,459,958
5,493,067
$388,404
$510,166
600,364
4,134
8,351
540,176
1 ,046,604
3,086
(19,572)
(123,953)
(1,148)
2,610
(157,486)
0
0
$2,413,330

$2,413,330
62,914
0
0
$2,350,41 6
890,808

$2,413,330
890,808
0
0
0
$1 ,522,522
7,015,590
$343,262
$525,471
630,382
4,258
8,601
556,381
1 ,098,934
3,178
(20,159)
(127,672)
(1,183)
2,688
(162,211)
0
0
$2,518,669

$2,518,669
62,914
0
0
$2,455,755
930,731

$2,518,669
930,731
0
0
0
$1 ,587,938
8,603,528
$303,399

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario

Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Construction (Inv. Year 0)
Engineering and Planning (Inv. Year 0)
Construction (Inv. Year 1)
Engineering and Planning (Inv. Year 1)
Purchased Equipment (Inv. Year 1)
Equipment Installation (Inv. Year 1)
Training (Inv. Year 1)
Engineering Costs - Equipment (Inv. Year 1)






Total Initial Investment Costs
CashFlow-Alt1 -oaS


$0
0
0
0
0
0
6
0
0
0
0
0
0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Virgin Raw Materials (Start Year 1)
Vendor Disposal (Start Year 1)
Manifesting Labor (Start Year 1 )
Maintenance of Vendor Relationships (Start Year 1)
Virgin Raw Materials (Start Year 2)
Vendor Disposal (Start Year 2)
Manifesting Labor (Start Year 2)
Utilities (Start Year 2)
Direct Labor (Start Year 2)
Recycling Permit Renewal (Start Year 2)
Maintenance of Vendor Relationships (Start Year 2)
Virgin Raw Materials (Start Year 3)


Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
- Depreciation
- Expensed Initial Investment Costs
•fTaxabte Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 37.9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
- Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
4-' Salvage Value
After-Tax Cash Flow
Cumulative Cash Flow
l! Discounted Cash Flow
$541 ,235
661 ,901
4,385
8,859
573,073
1,153,880
3,274
(20,764)
(131,502)
(1,218)
2,768
(167,077)
0
0
$2,628,816

$2,628,816
62,914
0
0
$2,565,901
972,477

$2,628,816
972,477
0
0
0
$1 ,656,339
10,259,867
$268,193
$557,473
694,996
4,517
9,125
590,265
1 ,21 1 ,574
3,372
(21 ,386)
(135,447)
(1,255)
2,852
(172,089)
0
0
$2,743,996

$2,743,996
62,914
0
0
$2,681 ,082
1,016,130

$2,743,996
1,016,130
0
0
0
$1 ,727,866
1 1 ,987,733
$237.097
$574,197
729,746
4,652
9,399
607,973
1,272,153
3,473
(22,028)
(139,511)
(1 ,292)
2,937
(177,252)
0
0
$2,864,447

$2,864,447
62,914
0
0
$2,801 ,533
1 ,061 ,781

$2,864,447
1 ,061 ,781
0
0
0
$1 ,802,666
13,790,399
$209,628
$591 ,423
766,234
4,792
9,681
626,212
1 ,335,761
3,577
(22,689)
(143,696)
(1,331)
3,025
(182,570)
0
0
$2,990,418

$2,990,418
62,914
0
0
$2,927,504
1,109,524

$2,990,418
1,109,524
0
0
0
$1 ,880,894
15,671,293
$185.360


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$609,165
804,545
4,936
9,971
644,999
1 ,402,549
3,685
(23,370)
(148,007)
(1,371)
3,116
(188,047)
0
0
$3,122,171

$3,122,171
62,914
0
0
$3,059,257
1,159,458

$3,122,171
1,159,458
0
0
0
$1,962,713
17,634,006
$163,918

-------
                            INCREMENTAL PROFITABILITY ANALYSIS
 Analysts Name: Batch Still Solvent Recovery                  Date: 9/1/96
                                                                           Profit-pg1
 P2/FINANCE calculates three indicators of profitability. (See on-line help for more detailed descriptions.)

 Net Present Value (NPV), the most reliable indicator, is the value in today's dollars of the discounted future savings of
 a project. A positive NPV indicates a profitable project. When considering multiple projects, the most profitable project
 has the highest NPV.

 Internal Rate of Return (IRR) is the Discount Rate for which the NPV of a project would equal zero. An IRR greater
 than the Discount Rate indicates a profitable project. When considering multiple projects, the most profitable project usually,
 but not always, has the highest IRR. IRR cannot be calculated for some projects with irregular cash flows.

 Discounted Payback is the time period within which the discounted future savings of a project repay the Initial Investment
 Costs. A shorter payback period often, but not always, indicates a more profitable project because Discounted Payback
 does not account for cash flows that occur after the payback period. Discounted Payback cannot be calculated for some projects.
 P2/FINANCE provides four time horizons for calculating Net Present Value and Internal Rate of Return.
 P2/FINANCE automatically calculates the profitability overs, 10, and 15 years.
 You may choose an optional fourth time horizon between 1 and 15 years.            Optional Time Horizon
This analysis calculates the incremental profitability of each Alternative Scenario relative to the Base Scenario.
Base Scenario Name:       Off-Site Waste Disposal and Treatment
Net Present Value ($}

Scenario
Name
                                                              Years 0-5   Years 0-10  Years 0-15  Years 0- 12
Alternative Scenario 1
Alternative Scenario 2
 Batch Still Recovery System
(762,779)
     NA
1,259,156
      NA
2,323,351
      NA
1,764,445
      NA
Internal Rate of Return (%)

Scenario	Name
                                    Years 0-5   Years 0-10  Years 0-15 Years 0-12
Alternative Scenario 1
Alternative Scenario 2
 Batch Still Recovery System
   8.8%
     NA
   26.2%
      NA
   29.3%
      NA
   27.9%
      NA
Discounted Payback (years)
Scenario
Name
                                                                Payback
Alternative Scenario 1
Alternative Scenario 2
 Batch Still Recovery System
   6.51
     NA

-------
Appendices

-------
        Appendix A:
Copy of the Blank Spreadsheet

-------
P2/FI NANCE
Version 3.0
Title-pg1
Date: ty
 PROJECT TITLE:
 PREPARED BY:
 ORGANIZATION:
 COMMENTS:
                                      P2/FINANCE

                            Pollution Prevention Financial Analysis
                                and Cost Evaluation System

                                       Version 3.0
                                     Copyright 1996
                                      Tellus Institute
                                       Boston, MA

-------
Analysis Name: Blank Spreadsheet
DEFAULT PARAMETERS
Date: 9/1/96 Default-pg1
Global Parameters
P2/F1NANCE uses the Inflation Rate, Discount Rate, and Income Tax Rate
entered here for calculations on the Tax Deduction Schedule, Incremental
Cash Flow Analysis, and Incremental Profitability Analysis sheets.
Inflation reflects the overall rate at which you expect prices to increase.
For cases In which tills Inflation Rate does not fully capture expected
price changes, P2/FINANCE allows you to define an additional
Escalation Rate for each Annual Operating Cost category.
Inflation Rate
:• ": V-: ;''3.5%1
The Discount Rate accounts for the fact that there is an opportunity
cost to using money — if you choose to invest in one project, you
lose the opportunity to gain a return on another investment. Many
companies us* their weighted average cost of capital as a Discount
Rate, For more information on Discount Rate and its relationship to
inflation, scathe on-line help.
Discount Rate
.'.•.- .:.:.:: 12iO%i
State and local income taxes are deductible from the taxable income
used to calculate federal taxes. Enter your Local, State, and
Federal Income Tax Rates below, and P2/FINANCE will calculate an
Aggregate Income Tax Rate.
Local Income Tax Rate
State Income Tax Rate
Federal Income Tax Rate
Aggregate Income Tax Rate
-.-.;• V "5.0%;
••:.i',::::.-v:f5:7%:
• ••••-,•> 26.7%

41 .9% I


f& D»fa«& (FwwaaftSerR.eoiifjfetJ fcy lf& «se*1» thJs. saettow
c&rt be applid^ to- «» efttife pfojcfi t f&e by pressing; AtT*p.
P2/FINANCE uses the Depreciation Method and Period
defaults for all Initial Investment Costs. You can chang
Depreciation Method and Period for individual categori
Investment Costs sheet
Depreciation Method
Depreciation Period
For Depredation Method, use one of these abbreviatio
Straight One
150% Declining Balance switching to Straight Line
200% Declining Balance switching to Straight Line
Expensed (tax deductible in the first year)
Working Capital (not tax deductible)
entered here as
s the
ss on the Initial
DDE :/:
: : ':5.0
is:
SL
1.5DB
DDBor2DB
EXP
we



Scenario Parameters
P2/FINANCE allows you to create two alternative financial analysis
scenarios, which represent different investment options you are
considering. You also can create a baseline scenario, which
contains data on your current "business-as-usual" operations. On
the Incremental Cash Row Analysis and the Incremental Profitability
Analysis sheets, the Alternative Scenarios are compared to the Base
Scenario, i.e., P2/FINANCE calculates incremental cash flows and
profitability.
The Investment Year and Lifetime entered here ares used as defaults
for both Initial Investment Costs and Annual Operating Costs.
P2/FINANCE assumes that investments occur AT THE END OF THE
INVESTMENT YEAR, so the default Start Year for Annual Operating
Costs is Investment Year + 1 . The most common Investment Year
will be Year 0, i.e., most Initial Investment Costs are incurred at the
very beginning of the project Lifetime.
Alternative Scenario 1
Name
I Alternative Scenario 1 Name ; ; , ; • : : ,•.;. '•?

lnv.Year| 0| Lifetime! '. •"• "-:1 • -"/'ISd

Start Year 1 1| End Year I 15 1

Alternative Scenario 2
Name
I Alternative ^Scenario 2 Name • :,'•..•' :•.''. :',••. : V1. v ; - ,.! '^i I; ,'; :•»;

Inv. Year) •• • 0] Lifetime [•'•:•,':': :•;:••'••• ';;5i:,:-15j

Start Year] 1| End Year I 15 1

Base Scenario
Name
Base Scenario Name . • : ,..,:..,:.::.;::; ::|

Inv. Year | ; , 0 | Lif etime r : • , .' -1: - :" :': :f Si

Start Year I 1| End Year I 151


-------
INITIAL INVESTMENT COSTS - Alternative Scenario 1
Alternative Scenario 1 ' Alternative Scenario 1 Name Date: 9/1 /96 Inv— Alt! —oat
Initial Investment Costs
$ Amount Initial Investment Costs S Amount
I Purchased Equipment (Purchase, Tax, Delivery)
Dep. Method :DDB
Dep. Period 5.0
Process Equipment
Investment Year
Lifetime
'
Storage and Materials Handling Equipment
Safety/Protective Equipment
Monitoring/Control Equipment
laboratory/Analytical Equipment
,

,

^ f '

\
Spare Parts
Salvage Value
»
TOTAL
0
IS









$0
I Planning/Engineering (Labor, Materials)
Dep. Method DDB
Dep. Period [ 5.0
In-house Planning
Jn-house Enqineerinq/Design
Procurement
Investment Year
Lifetime



Vendor/Contractor Fees
;
1
Salvaqe Value
TOTAL
0
15


%



$0

| Construction/Installation (Labor, Materials)
Dep. Method DDB
Dep. Period 5.0
In— house
Equipment Rental
Vendor/Contractor Fees
Investment Year
Lifetime





Salvaqe Value |:
| Permitting
Deo. Method DDB
Dep. Period 5.0
In^House'
Permit Fees
Vendor/Contractor Fees

Salvaae Value I
I Working Capital
Dep. Method DDB
Dep. Period ,'•'•• "•'•••' 5:O
Haw Materials
Other Materials & Supplies
Product Inventory
Salvaqe Value 1

TOTAL
Investment Year
Lifetime




TOTAL
0
15




-
SO

0
15



'
$0

Utility Connections/Systems
Dep. Method
Dep. Period
DDB Investment Year
5.0: Lifetime
Electricity
Steam
Wafer
Fuel
Plant Air
Inert Gas
Refrigeration
.Sewerage.
General Plumbing
Salvage Value
; TOTAL
0
15



'




^ •••
$0
Site Preparation (Labor. Materials)
Dep. Method
Dep. Period
DDB Investment Year
5.0 Lifetime
In— house
Demolition & Ctearinq
Old Equipment/Rubbish Disposal
Gradinq/Lanciscapinfl
Equipment Rental
Vendor/Contractor Fees
Salvage Value
Start-up/Tn
Dep. Method
Dep. Period
-: -•••,•-•-:..-. TOTAL
O
15
„


•' :

'•
$0
lining (Labor. Materials)
DDB. ..; '.'••:'. Investment Year
5.0 Lifetime
In-house
Trials/Manufacturing Variances
Process/Equipment Training
Safety/Environmental Training
Vendor/Contractor Fees
Salvage Value I TOTAL
Buildings &
Dep. Method
Dep. Period

0
15





$0
Land
DDB Investment Year
5.0 Lifetime




Salvaqe Value I TOTAL
0.
15



,
so
Contingency
Investment Year
Lifetime
i


TOTAL
0
15



$0



Dep. Method
Dep. Period
DDB Investment Year
5.0 Lifetime
..


Salvage Value
TOTAL
0
15
,


SO


-------
'Olhcr
Dtp. Method
D«p, Pttiod

DOB
5,0

Investment Year
Lifetime





Si'fvajje Valiit
[Other
Dtp Method
Dtp,P«fk»d


DOB
5.0

TOTAL
Investment Year
Lifetime




§«lv*g*V«iu*


TOTAL
0
15





$0

O
15




SO


Other
Dep. Method
Dep. Period
lnv-AIM-pg2
DDB
5.0
Investment Year
Lifetime

"




Salvage Value |
Other
Dep. Method
Dep. Period

DDB
5.0
TOTAL
Investment Year
Lifetime

I
> /

Salvage Value



TOTAL
0
15



/ •> '

$0
,
0
15
° %( •>•*
<


$0


-------
INITIAL INVESTMENT COSTS - Alternative Scenario 2
Alternative Scenario 2' Alternative Scenario 2 Name Date: 9/1/96 . Inv— Alt2— pg1
Initial Investment Costs
$ Amount Initial Investment Costs $ Amount
Purchased Equipment (Purchase, Tax, Delivery)
Dep. Method DDB
Dep. Period 5.0
Process Equipment
Investment Year
Lifetime

Storage and Materials Handling Equipment
Safety/Protective Equipment
•Monitoring/Control Equipment
Laboratory/Analytical Equipment





L
:Spare Parts
Salvage Value |

TOTAL
0
15









SO

Planning/Engineering (Labor, Materials)
Dep. Method DOB
Dep. Period 5.0
In-house Planning
In— house Engineering/Design
Procurement
Vendor/Contractor Fees:

Investment Year
Lifetime




••

Salvaqe Value |
TOTAL
Construction/Installation (Labor, Materials)
Dep. Method DOS:
Dep. Period 5.0
In-house
Eauioment Rental
Vendor/Contractor Fees
Investment Year
Lifetime




, *.
Salvage Value
Permitting
Deo. Method f DDB
Dep. Period \ 5.0
TOTAL
Investment Year
Lifetime
.In -House
PermSFees
Vendor/Contractor Fees

Salvage Value I
Working Capital
Deo. Method DDB
Dep. Period . 5;0
TOTAL
0
15






SO

Utility Connections/Systems
Dep. Method
Dep. Period
DDB Investment Year
:5;0; Lifetime
Electricity
Steam
Water
Fuel
Plant Air
Inert Gas
Refrigeration
Sewerage
General Plumbing
Salvage Value f TOTAL
- 0
15









SO
Site Preparation (Labor, Materials)
Dep. Method
Dep. Period
DDE: . Investment Year
5.0 Lifetime
In— house
Demolition & Clearing
: Old Equipment/Rubbish Disposal
Grading/Landscaping
Equipment Rental
Vendor/Contractor Fees
Salvage Value 1 :: TOTAL
0
15






$0
Start-up/Training (Labor, Materials)
0
15





SO

0
15




SO

Dep. Method
Dep. Period
DDB Investment Year
5.0 Lifetime
In-house
Trials/Manufacturina Variances
Process/Equipment Training
Safety/Environmental Training
Vendor/Contractor Fees
Salvage Value
Buildings &
Dep. Method
Dep. Period
:••••'•• "•• : ':. ' ' TOTAL
0
15





$0
Land
DDB. . Investment Year
5.0 Lifetime




Salvage Value
TOTAL
0
15




SO
Contingency
Investment Year
Lifetime
Raw Materials
Other Materials & Supplies
Product inventory
Salvage Value



TOTAL
0
15



SO


Dep. Method
Dep. Period
;DDB; ; Investment Year
5.0 Lifetime



Salvage Value
TOTAL
0
15



$0


-------
1 Other
Dtp, Method
D«p. Period


DOB
5.0

Investment Year
Lifetime





S»'iwi» Value
f Other
Dtp, Method
Dtp, Period



DOS
5.0
TOTAL
Investment Year
Lifetime




Salvage Value


TOTAL
0
15





SO

0-
15,




$0


Other
Dep. Method
Dep. Period

PDB
5.0

lnv-Alt2-pg2
Investment Year
Lifetime


i ,•
i

Salvage Value
Other
Dep. Method
Dep. Period


DDB
5.0
TOTAL
Investment Year
Lifetime




Salvage Value I


TOTAL
0
15
i
••

"* *"

SO

0
15
i


, ,
SO


-------
Base Scenario
Base Scenario Na
INITIAL INVESTMENT COSTS - Base Scenario
me Date: 9/1 796
Inv-Base-pgl
Purchased Equipment (Purchase, Tax, Delivery) I Utility Connections/Systems
Dep. Method
Dep. Period
DDB
5.0
Process' Equipment
Investment Year
Lifetime

Storageand Materials Handling Equipment
Safety/Protective^ Equipment
Monitoring/Control Equipment
Laboratory/AnalyticalEquiprnent
i
1



•SpareParts
Salvage Value |
TOTAL
0
15









$0





Dep. Method
Dep. Period
Electricity
Steam
DDB
- 5.0


Investment Year
•Lifetime


Water
Fuel 	
Plant A6-
Inert Gas
Refrigeration
Sewerage




General Plumb ng
Salvage Value [•
Planning/Engineering (Labor, Materials)
Dep. Method
Dep. Period
In— house Plan
Jn-housaEnqi
Procurement
DDB
5.0
ning
neerinq/Desiqn
Investment Year
Lifetime
Vendor/Contractor Fees
Salvage Value • : :>; TOTAL
Construction/lnstallation (Labor, Materials)
Dep. Method
Dep. Period
In-house
Equipment Rer
Vendor/Contrac
DDB
5.0
tal
tor-'F«w»s:
Salvage Value I
Permitting
Dep. Method
Dep. Period
In -House
Permit Bees
DDB
5.0
Vendor/Contractor Fees1
Salvage Value t
Investment Year
Lifetime
TOTAL
Investment Year
Lifetime
TOTAL
0
15
$0
0
15
$0
0
15
SO


TOTAL
Site Preparation (Labor, Materials)
Dep. Method
Dep. Period
Demolition &C
Old Equipment
DDB
5.0
earina
Rubbish Disposal
Investment Year
Lifetime
Grading/Landscaping
Equipment Rental
Vendor/Contractor Fees
Salvage Value I TOTAI
Start-up/Training (Labor. Materials)
Dep. Method
Dep. Period
Trials/Manufad
;DDB:
" •. :-.•. •:•-: 5;0
uring Variances .
Safety/Environmental Traininq
.VeridoSGontractor Fees
Salvage Value I
| Buildings & Land


Working Capital |
Dep. Method
Dep. Period
DDB
5.0
Investment Year
Lifetime
Raw Materials
Other Materials & Supplies
Prbductilnventory
Salvage Value
.1
0
15


TOTAL SO



Dep. Method
Dep. Period
Salvage Value
Contingency

Dep. Period
DDB
.•5.0
	 1

DDB
5.0
Investment Year
TOTAL
Investment Year
Lifetime
TOTAL
0
15

— 	 . 	
— 	




	 . — .

$0

0
15
SO
0
15
SO
Q
15
SO

Investment Year
Lifetime


Salvage Value |
I
TOTAL
0
15


SO

-------
1 Other
D«p, Method

DOB
5.0
SatvaoeVaiuet
1 Other
n»p. Method 1 DOB
Dtp,P«tod[ 5.0
Safv-ag«V«!ua|

Investment Year
Lifetime
| ' TOTAL
Investment Year
Lifetime
TOTAL
-•••:. ..:•.-.' 0?
• •:'•: • : 15;
so"
. . - . • ;" •.•-- 15.
so"




Other
Dep. Method
Dep. Period
lnv-Base-pg2
DDB
5.0
Salvaqe Value |
Other
Dep. Method
Dep. Period
uuo
5.0
Salvaae Value!
Lifetime
TOTiM.
Lifetime
TOTAL
15
$0
15
$0

-------
ANNUAL OPERATING COSTS - Alternative Scenario 1
tess^^fefec^te^^i^^^^i^^^^^-i^Si^^iS^i^^^'^iiftiSSSi^^^^i^^
Alternative Scenario 1 : Alternative Scenario 1 Name Date1


Direct Materials (Purchase, Delivery, Storage) Utilities
Escalation Rate] . :::- :..,0.0%| StartYear
End Year
Raw Materials
Solvents
Catalysts





•.•••• '
TOTAL
Direct Labor (Wage/Salary, Benefits)
Escalation Rate! . ; : O.0?/i:| StartYear
End Year
Operating
Supervision
Manufacturing Clerical
Maintenance


TOTAL
Regulatory Compliance (Labor, Materials) #1
Escalation Ratef:- 0,0% I StartYear
End Year
Permitting
•Training •
: Moriitoringj'lrispections
Testing
Generator Fees/Taxes
TOTAL
Product. Quality (Labor, Materials)
Escalation Rate | . 0.054-1 StartYear
End Year
QA/QC :•-• •
Product Rejects;
ProducfcReturns
•. • . •••' • ; ..
TOTAL
Revenues — By— product
Escalation Rate t : 0:0% I StartYear
End Year
Marketable By-rproducts
Marketable Pollution Permits

TOTAL
1
15



,





$0

1
15






$0

1
15





$0

1
15




$0

t
15



SO

Escalation Rate | s; : 0;0%| StartYear
End Year

Electricity
Steam
Water
Fuel
Plant Aft-
Inert Gas
Refrigeration
Sewerage

TOTAL
Waste Management (Labor, Materials)
Escalation Rate | 0.0% | StartYear
End Year
On-hsite- Handling & Storage
On-sfteiRre— treatment
JOnh-srte ^Treatment
Mauling -..-.: ; A.;
C3ff-site.;Treatment
Off-sfteBisposal •" .
TOTAL
Regulatory Compliance (Labor, Materials) fZ
Escalation Rate | ': OlO%! StartYear
End Year
labeling/ -
Manifestirtg .-•-.•;•
Recordkeeping
Reporting ,

TOTAL
Revenues - Product
Escalation Rate I 0.0% i Start Year
End Year
Change Jn Product Throughput
Chanae in Market Share


TOTAL
Insurance
Escalation Rate | 0.0%! StartYear
End Year
Workers' Health Insurance.
Workers'iCompensation
Pollution Liability Insurance
TOTAL
1
15

f







$0

1
15






SO

1
15





SO

1
15



-
$0

1
15



$0


-------
Fuhir* Liability
EJCftkiJon R»«« 1 0.0% | Start Year
End Year
FfQtc/PtMKiM ' • '"."
L«S*ICOSt» ' • -• :; " '•
P«Toral Injury •"•••
Piop«tyjNatural Btxourc* Damftga ::
Btm*cS»bon ,: '-.•."'
TOTAL
|01h*r '. ' •:v;"""';:
EicalatkHiRat*! 0.0% I Start Year
End Year

•%


TOTAL

.,
1
15





SO
-'
- 1
15




$0



















Other
Escalation Rate |/: ' : :: 0.0%| StartYear
End Year


(
'

TOTAL
Other
Escalation Rate I 0.0% I Start Year
End Year
•*

!
f ^
TOTAL

Op-Alt1-pg2
1
15

..
'


$0
«,
1
15
'

•, 1 •>•>•. % r>

$0


-------
ANNUAL OPERATING COSTS - Alternative Scenario 2


Direct Materials (Purchase, Delivery, Storage)
Escalation Rate) 0.0% | Start Year
End Year
: Raw Materials i
Solvents
.Catalysts.
•• ^ * ••••
••i.
v '
^
s '
..
TOTAL
Direct Labor (Wage/Salary, Benefits)
Escalation Rate j 0.0% | Start Year
End Year
Operating
Supervision
Manufacturing Clerical
Maintenance
i
•£
TOTAL
Regulatory Compliance (Labor, Materials) ft
Escalation Rate I 0.0% j Start Year
End Year
Permitting
Training
Monitoring/Inspections
Testing
Generator Fees/Taxes,
TOTAL
Product Quality (Labor, Materials)
Escalation Rate M: v- ;:D;DSS| Start Year
End Year
QA/QC
Product Rejects
Product Returns
tt -• f f j
TOTAL
! Revenues — By— product
Escalation Rate I 0.0%] Start Year
End Year
Marketable By-products
Marketable Pollution Permits

TOTAL
1
15
$0








$0

1
15




-
$0

1
15





$0

1
IS



so

1
15



$0


Utilities
Escalation Rate | 	 0.0% | Start Year

Electricity
Steam
End Year


Water
Fuel ~~~
PlantAir
Inert Gas
Refrigeration
Sewerage




TOTAL
Waste Management (Labor. Materials)
Escalation Rate
0:0%j Start Year
End Year
On-sfte Handling & Storage
On-stte Pre-treatment
On— site Treatment
Hauling ~ 	
Off-site Disposal
Regulatory C
Escalation Rate
Labeling
Manifesting
Recordkeepinq
Reporting

Revenues —
Escalation Rate
TOTAL
Compliance (Labor, Materials) #2
: OiO%:J Start Year
End Year





TOTAL
Product
>0.0%:i Start Year
End Year
Change in Product Throughput


Insurance
Escalation Rate j

TOTAL
,vv: •*•;:;.:•.: .;.o;0%:| Start Year
End Year
Workers' Health Insurance
Workers' Compensation
Pollution Liability Insurance

TOTAL
1
15

.







$0

1
15





SO

1
15





$0

1
15



$0

1
15



$0

-------
i Future Liability
Etentalion Rat« i 0.0% | Start Year
End Year
i FxKS.'Peralljts
jLe^tl Costs
Per coral Injury
PtopMty^iatur*) R»sourc« Damage
Remediation
TOTAL
Other
Escalation Ruiel 0,0% 1 Start Year
EndYear




TOTAL
' 1
•. •" • : 15





so

. - 1
. • . --is




$0


Op-Alt2-pg2
Other
Escalation Rate | 0.0% | Start Year
End Year

.<••,. , ",':•; ^



TOTAL
Other
Escalation Rate I : 0.0% I Start Year
End Year


;'-•••» '' • • •' .'•..:
,' ''''',•, ' '••(''' ' ' • •' ' : . " ' .
TOTAL
1
15





$0

1
15




$0


-------
ANNUAL
""? Siliii8SS6^Si^^^g3iTOg^^SJ^^Sil^^^i
Base Scenario: Base Scenario Name
Annual Operating Costs
| Direct Materials (Purchase, Delivery, Storage)
Escalation Rate [_ 0.0%J Start Year
End Year
Raw; Materials'
Solvents
Catalysts
<





TOTAL
Direct Labor (Wage/Salary, Benefits)
Escalation Rate! : .;OiO%| Start Year
End Year
Operating
Supervision
Manufacturing Clerical
Maintenance


TOTAL
Regulatory Compliance (Labor. Materials) #1
Escalation Rate [••• ; ttO%| Start Year
End Year
Permitting
Training
Monitoring/Inspections
Testing
Generator Fees/Taxes '
TOTAL
Product Quality (Labor, Materials)
Escalation Rate I' : o;o%| StartYear
End Year
QA/QC
Product Rejects
ProductReturns
. . '.v^. ,, .;. . ^ ^
TOTAL
Revenues — By— product
Escalation Rate |. . - : J0:0% I Start Year
End Year
Marketable By —products
Marketable Pollution Permits
.''"..,,-• . *
TOTAL

OPERATING
mmsmfimim

$ Amount

t
15







,

$0

1
! 15






SO

1
15





SO

1
15




SO

1
15



SO

CO

Date:

















































STS - Base Scenario

3/1/96
Annual Operating Costs
Utilities
Escalation Rate | 0.0% | StartYear
End Year
Electricity
Steam
Water
Fuel
Plant Afr
Inert Gas
Refrigeration
Sewerage
••
TOTAL
Waste Management (Labor, Materials)
Escalation Rate ; : 0.0%] StartYear
End Year
On-site Handling & Storage
On— site Pre— treatment
On-site Treatment
Hauling
Off-site Treatment
Off-site Disposal
TOTAL
Regulatory Compliance (Labor, Materials) fZ
Escalation Rate 0:0% | StartYear
End Year
libeling : :; •.,.-. r • •'•
Manifesting, v, ••": :: ::: ': •" •
fiecbrdkeeping :
fleportiria:.

TOTAL
Revenues — Product
Escalation Rate | : 0:0% | Start Year
End Year
Change in Producl.Throuqhput
Change irt Market Share


TOTAL
Insurance
Escalation Rate I : : 0.0% | StartYear
End Year
Wbrkers'.Health Insurance .
Workers'iCompensation
Pollution Liability: Insurance
TOTAL



Op-Base-Da1
$ Amount

1
15








'
$0

1
15






$0

1
15





$0

1
15




$0

1
15



SO


-------
1 Future Liability
Escalation Ratef 0.0% | Start Year
End Year
FlnnJPMtaRiM ' ' .• -
L*9*I Costs
Personal Injury
Proptfty*jN«£ur*l Resource Damage
Remediation
TOTAL
I Othor
BwalationRalel 0.0% 1 Start Year
End Year
	



TOTAL


1
15





SO

1
15




$0



















Other
Escalation Rate | - ,0.0%| Start Year
End Year





TOTAL
Other
Escalation Rate I 0.0% I Start Year
End Year



1 '
TOTAL

Op— Base— pg2
1
15





$0

1
15




$0


-------
SCENARIO SUMMARY - Alternative Scenario 1
Alternative Scenario 1 : Alternative Scenario 1 Name Date: 9/1 796
INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
ANNUAL OPERATING COSTS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
GLOBAL PARAMETERS
Project Title: Blank Spreadsheet
Inflation Rate 3.5%
Discount Rate 13.0%
Aggregate Income Tax Rate 41 .9%
Default Depreciation Method DDB
Default Depreciation Period 5
Salvage
Cost Value Inv.Year Lifetim
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Cost
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0


Depreciation
ft
15
15
15
15
15
15
15
15
15
15
15
15
15

Start Year End Year
1
1
1
1
1
1
1
1
1
1
1
1
1

1fa
15
15
15
15
15
15
15
15
15
15
15
15

Period
5
5
5
5
5
5
g
5
5
5
5
5
5

Escalation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%



Method
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB













































SCENARIO PARAMETERS







Default Investment Year
Default Lifetime
Default Start Year
Default End Year




















0
15
•j
15


-------
SCENARIO SUMMARY - Alternative Scenario 2

INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start- up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
ANNUAL OPERATING COSTS
Dkect Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
GLOBAL PARAMETERS
Project Title: Blank Spreadsheet
Inflation Rata
Discount Rate
Aggregate Income Tax Rate
Default Depreciation Method


Cost
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Cost
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Salvage
Value
$0
0
0
0
0
0
0
0
0
0
0
0
p
0
Summ-Alt2-pa1

Inv. Year Lifetime
0
0
0
0
0
0
0
0
0
0
0
0
0
0
16
15
15
15
15
15
15
15
15
15
15
15
15
15
Start Year End Year














1
1
1
1
1
1
1
1
1
1
1
1
1
1
16
15
15
15
15
15
15
15
15
15
15
15
15
15
Period
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Escalation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Method
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB












































SCENARIO PARAMETERS
3.5%
12.0%
41.9%
DDB
5




Default Investment Year
Default Lifetime
Default Start Year
Default End Year













0
15
1
15


-------
SCENARIO SUMMARY - Base Scenario
Base Scenario: Base Scenario Name Date: 9/1 796

INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
ANNUAL OPERATING COSTS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues — Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
GLOBAL PARAMETERS
Project Title: Blank Spreadsheet
Inflation Rate
Discount Rate
Aggregate Income Tax Rate
Default Depreciation Method
Default Depreciation Period

Cost
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Cost
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Salvage
Summ— Base— oa1
Depreciation
Value Inv. Year Lifetime
$0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
15
15
15
15
15
15
15
15
15
15
15
15
15
15
Start Year End Year
1
1
1
1
1
1
1
1
1
1
1
1
1
1
15
15
15
15
15
15
15
15
15
15
15
15
15
15
Period
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Escalation
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Method
DDE
DDE
DDB
DDE
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB















SCENARIO PARAMETERS

3.5%
12.0%
41.9%
DDE
5

Default Investment Year
Default Lifetime
Default Start Year
Default End Year














0
15
1
15


-------
TAX DEDUCTION SCHEDULE -
Alternative Scenario 1 : Alternative Scenario 1 Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken In that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Purchased Equipment (Purchase, Tax, Delivery) (DDB)
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor. Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
— Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Date:
0
0
0
0
0






0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
Alternative
9/1/96
1
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Scenario
1


Tax-Alt! -pg1
2
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
4
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION SCHEDULE - Alternative Scenario 1
Alternative Scenario 1 : Alternative Scenario 1 Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Purchased Equipment (Purchase, Tax, Delivery) (DDE
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
i
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Tax-Alt! -pg2
6
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
. 0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION SCHEDULE - Alternative Scenario 1
Alter nafive Scenario 1 : Alternative Scenario 1 Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Purchased Equipment (Purchase, Tax, Delivery) (DDE
Initial investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Tola! Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Tax-Altl -pg3
11
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
12
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION
Alternative Scenario 2: Alternative Scenario 2 Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Workinq Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
SCHEDULE -
Date:
0
0
0
0
0





Purchased Equipment (Purchase, Tax, Delivery) (DDB)
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start— up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other XDDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
Alternative
9/1/96
1
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Scenario
2


Tax-AK2-pg1
2
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
4
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION SCHEDULE - Alternative Scenario 2
Alternative Scenario 2: Alternative Scenario 2 Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Purchased Equipment (Purchase, Tax, Delivery) (DDE
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
She Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
— Taxable Gain (Loss) on Salvaqed Equipment
Total Tax Deductions
Tax-Alt2-pg2
6
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION SCHEDULE - Alternative Scenario 2
Alternative Scenario 2: Alternative Scenario 2 Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Purchased Equipment (Purchase, Tax. Delivery) (DDE
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DOB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaqed Equipment
Total Tax Deductions
Tax-Alt2-pg3
11
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
12
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
0
0
0
0





0
0
0
0
0
0
o
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14
0
0
0
0





o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
o
0
0
	 15^
1
1
1
0





t
\i
0
n
k
0
01
1
0

0
n
L
0

0

0

0
n
v
0
o
0
o
0
o
0
o
0
o
0
o
o,
0
0

-------
TAX DEDUCTION SCHEDULE - Base
Base Scenario: Base Scenario Name
Operating Year 	 	 	
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs 	 	
TotnJ Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depredation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Purchased Equipment (Purchase, Tax, Delivery) (DDB)
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor. Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment 	
Total Tax Deductions


Date: 9/1/96
0
0
0
0
0





0

0
0
0

0

0

0

0
0
0

0

0

0

0

0

0
1
0
0
0
0




0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
0
0
0




0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
0


0




0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0


Tax-Base-pg1
4
0


0




0
0
0

0
0
0
0
0

0

0

0
0
0
0
0
0
0

0

0
0
0
0
0

0
0
5
0


0




0

0

0
0
0
0
0

0

0

0

0
0
0
0
0

0

0
0
0
0
0


0

-------
TAX DEDUCTION
Base Scenario: Base Scenario Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
SCHEDULE -
Base
Scenario


Tax- Base -pg2
6
0
0
0
0





Purchased Equipment (Purchase, Tax, Delivery) (DDE 0
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
g
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
TAX DEDUCTION SCHEDULE -
Base Scenario: Base Scenario Name
Opcratinq Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Wen-king Caortal Initial Investment Costs
Total Initial Investment Costs
For each category, the top line indicates the tax
deduction taken In that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Value for depreciable categories.
Purchased Equipment (Purchase, Tax, Delivery) (DDE
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDB)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor. Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor. Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
Initial Investment Cost and Remaining Book Value
Contingency (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Other (DDB)
Initial Investment Cost and Remaining Book Value
Total Depreciation
Expensed Initial Investment Costs
- Taxable Gain (Loss) on Salvaqed Equipment
Total Tax Deductions
Base Scenario
Tax-Base-pg3
11
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6
0
0
0
0
0
0
0
0
0
0
0
12
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
0
0
0
0





0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Analysis Name: Blank Spreadsheet

INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
Total Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs) /Savings
- Depreciation
- Expensed Initial Investment Costs
+Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 41.9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
- Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
+ Salvage Value
After— Tax Cash Row
Cumulative Cash Row
Discounted Cash Row
Date

$0
0
0
0
0
•0
0
0
0
0
0
0
0
0
$0


























0


$0
0
$0
: 9/1/96

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0


2
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0


3
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0


4
$0
0
0
0
0
0
0
0
o
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0


5
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
o
0
o
o
o
o
o
o
0
$0

$0
o
o
0
$0
0

$0
0
o
0
0
$0
0


-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario

Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
Total Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor. Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
- Expensed Initial Investment Costs
^-Taxable Gain (Loss) on Salvaqed Equipment
Taxable Income
Income Tax at 41 .9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
— Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
4- Salvage Value 	 	 	
After— Tax Cash Flow
Cumulative Cash Flow

CashFlow-Alt1 -Dd2
6

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Analysis Name: Blank Spreadsheet
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
Total Initial Investment Costs '
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
- Expensed Initial Investment Costs
+Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 41 .9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
- Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
+ Salvage Value
After— Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
CashFlow-Altl -oa3
11
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0
12
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0
13
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0
14
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0
15
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 2 vs. Base Scenario
_AjQ£jj2lf JfelQI ifitelJcS wead sh e et
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase. Tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting ,
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
Tata] Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Wast* Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Sav!ngs
- Depreciation
- Expensed Initial Investment Costs
+ Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 41.9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs) /Savings
- Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
•+• Salvage Value
After-Tax Cash Row
Cumulative Cash Row
Dtscounted_Cjssh Row
Date
0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0


























0


$0
0
so
9/1/96
1

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0
Cash Row- Alt2-oa 1
2

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0
3

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0
4

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
SO

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

so
0
0
0
0
$0
0
no
5

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
so

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 2 vs. Base Scenario
Analysis Name: Blank Spreadsheet

INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, tax, Delivery)
Utility Connections/Systems
Planning/Engineering (Labor, Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
Total Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
- Depreciation
- Expensed Initial Investment Costs
+Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 41 .9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
- Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
+ Salvage Value
After— Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow

6
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0

7
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
,0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0

8
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0

9
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0


10
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
o
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
so

-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 2 vs. Base Scenario

Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax. Delivery)
Utility Connections/Systems
Planning/Engineering (Labor. Materials)
Site Preparation (Labor, Materials)
Construction/Installation (Labor, Materials)
Start-up/Training (Labor, Materials)
Permitting
Buildings & Land
Working Capital
Contingency
Other
Other
Other
Other
Total Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Direct Materials (Purchase, Delivery, Storage)
Utilities
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
Regulatory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future Liability
Other
Other
Other
Total Annual Operating (Costs)/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (Costs)/Savings
— Depreciation
— Expensed Initial Investment Costs
•f-Taxabte Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 41 .9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (Costs)/Savings
— Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
+ Salvage Value 	 	 	
After— Tax Cash Flow
Cumulative Cash Flow

CashFlow-Alt2-pa3


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
SO


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0


$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0

$0
0
0
0
$0
0

$0
0
0
0
0
$0
0
$0

-------
                            INCREMENTAL PROFITABILITY ANALYSIS
 Analysis Name: Blank Spreadsheet                          Date: 9/1/96
                                                                          Profit-pg1
 P2/FINANCE calculates three indicators of profitability. (See on-line help for more detailed descriptions.)

 Net Present Value (NPV), the most reliable indicator, is the value in today's dollars of the discounted future savings of
 a project.  A positive NPV indicates a profitable project. When considering multiple projects, the most profitable project
 has the highest NPV.

 Internal Rate of Return (IRR) is the Discount Rate for which the NPV of a project would equal zero. An IRR greater
 than the Discount Rate indicates a profitable project. When considering multiple projects, the most profitable project usually,
 but not always, has the highest IRR. IRR cannot be calculated for some projects with irregular cash flows.

 Discounted Payback is the time period within which the discounted future savings of a project repay the Initial Investment
 Costs. A shorter payback period often, but not always, indicates a more profitable project because Discounted Payback
 does not account for cash flows that occur after the payback period.  Discounted Payback cannot be calculated for some projects.
P2/FI NANCE provides four time horizons for calculating Net Present Value and Internal Rate of Return.
P2/FI NANCE automatically calculates the profitability over 5,10, and 15 years.
You may choose an optional fourth time horizon between 1 and 15 years.            Optional Time Horizon
This analysis calculates the incremental profitability of each Alternative Scenario relative to the Base Scenario.
Base Scenario Name:       Base Scenario Name
Net Present Value ($)

Scenario
Name
                                                              Years 0-5  Years 0-10   Years 0-15  Years 0-1
Alternative Scenario 1
Alternative Scenario 2
 Alternative Scenario 1 Name
 Alternative Scenario 2 Name
     NA
     NA
NA
NA
NA
NA
NA
NA
Internal Rate of Return (%)
Scenario
Name
                                                              Years 0-5  Years 0-10   Years 0-15  Years 0- 1
Alternative Scenario 1
Alternative Scenario 2
Alternative Scenario. 1 Name
Alternative Scenario 2 Name
NA
NA
NA
NA
NA
NA
NA
NA
Discounted Payback (years)
Scenario
Name
Payback
Alternative Scenario 1
Alternative Scenario 2
Alternative Scenario 1 Name
Alternative Scenario 2 Name
     NA
     NA

-------

-------
P2/FINANCE Version 3.0
Appendices
Appendix B:   Total Cost Assessment Cost
Inventory
INITIAL INVESTMENT COSTS

Purchased Equipment
      Process Equipment
      Storage and Materials Handling Equipment
      Safety/Protective Equipment
      Monitoring/Control Equipment
      Laboratory/Analytical Equipment
      Spare Parts

Utility Connections/Systems
      Electricity
      Steam
      Water
      Fuel
      Plant Air
      Inert Gas
      Refrigeration
      Sewerage
      General Plumbing

Planning/Engineering (Labor, Materials)
      In-house Planning
      In-house Engineering/Design
      Procurement
      Vendor/Contractor Fees

Site Preparation (Labor, Materials)
      In-house
      Demolition & Clearing
      Old Equipment/Rubbish Disposal
      Grading/Landscaping
      Equipment Rental
      Vendor/Contractor Fees

Construction/Installation (Labor, Materials)
      In-house
      Equipment Rental
      Vendor/Contractor Fees
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Start-up/Training (Labor, Materials)
       In-house
       Trials/Manufacturing Variances
       Process/Equipment Training
       Safely/Environmental Training
       Vendor/Contractor Fees

Permitting
       In-house
       Permit Fees
       Vendor/Contractor Fees

Buildings & Land

Working Capital
       Raw Materials
       Other Materials & Supplies
       Product Inventory

Contingency
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ANNUAL OPERATING COSTS

Direct Materials (Purchase, Delivery, Storage)
       Raw Materials
       Solvents
       Catalysts

Utilities
       Electricity
       Steam
       Water
       Fuel
       Plant Air
       Inert Gas
       Refrigeration
       Sewerage

Direct Labor (Wage/Salary, Benefits)
       Operating
       Supervision
       Manufacturing Clerical
       Maintenance

Waste Management (Labor, Materials)
       On-site Handling & Storage
       On-site Pre-treatment
       On-site Treatment
       Hauling
       Off-site Treatment
       Off-site Disposal

Regulatory Compliance (Labor, Materials)
       Permitting
       Training
       Monitoring/Inspections
       Testing
       Generator Fees/Taxes
       Labeling
       Manifesting
       Recordkeeping
       Reporting

Product Quality (Labor, Materials)
       QA/QC
       Product Rejects/Returns
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Revenues - Product
       Change in Product Throughput
       Change in Market Share

Revenues - By-product
       Marketable By-products
       Marketable Pollution Permits

Insurance
       Workers' Health Insurance
       Workers' Compensation
       Pollution Liability Insurance

Future Liability
       Fines/Penalties
       Legal Costs
       Personal Injury
       Property/Natural Resource Damage
       Remediation
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Appendix C:   Glossary of Financial Terms
Annual Cash Flow
Break-Even-Point
Capital Budget
Cash Flow (from
an investment)

Cost Accounting System
Cost Allocation
Discount Rate
Discounted Cash Flow
Rate of Return (DCRR)
For an investment, the sum of cash inflows and outflows for a given
year (see Cash Flow).

The point at which cumulative incremental annual cash flows of an
investment aggregate to 0. The Break-Even-Point designates the end
of a project's  investment Payback Period (see Incremental Cash
Flow and Payback Period).

A statement of the firm's planned investments, generally based upon
estimates of  future sales, costs,  production  and  research and
development (R&D) needs, and availability of capital

The dollars coming to the firm (cash inflow) or paid out by the firm
 (cash outflow) resulting from a given investment.

The internal procedure used to track and allocate production costs
and revenues to a product or process.  Defines  specific cost/profit
centers, overhead vs. allocated costs, degree of cost disaggregation.

A process within an internal cost accounting system of assigning
costs and revenues to cost and profit centers for purposes of product
pricing, cost tracking, and performance evaluation.

The discount rate (or Cost of Capital) is the required rate of return on
a capital investment.  In profitability analysis, the discount rate is
used in Net Present Value (NPV) calculations to express the  value of
a future expenditure in the  present year.   The discount rate  is
expressed as a percentage.

See Internal Rate of Return.
Financial Accounting
The process that culminates in the preparation of financial reports
relative to the enterprise as a whole for use by parties both internal
and external to the enterprise.
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Financial Reporting
Financial Statements
Full Cost Accounting
Hurdle Rate
Incremental Cash Flow
(of an investment)
Internal Rate of Return
(IRR)
Managerial Accounting
Measure of Profitability
Net Present Value (NPV)
Required by authoritative pronouncement, regulatory rule or custom,
including:  corporate annual reports, prospectuses, annual  reports
filed with government agencies, descriptions of an enterprise's social
or environmental impact.

The  principal  means  through  which  financial  information is
communicated to those outside an enterprise.  Statements include the
Balance Sheet, Income Statement, and Statement of Cash Flows.

A method of managerial accounting which accounts  for both the
direct and indirect costs of an item.  Full cost accounting uses
historical data to assign all costs to a process,  product or product
line, most often for purposes of pricing.

The  internally defined  threshold,  or minimum acceptable  rate of
return, required for project  approval, e.g.,  15% ROI, or  2 year
payback.

The  cash flow  of an alternative  practice (e.g., after a  pollution
prevention investment has been implemented) relative to the current
practice.  Incremental cash flow is calculated by taking the
difference between the cash flow for the current practice and the
alternative practice.

The discount rate at which the net savings (or NPV) on a project are
equal to zero. The computed IRR of an investment is compaired to a
company's desired rate of return.

The process of identification, measurement, accumulation, analysis,
preparation,   interpretation,  and  communication  of  financial
information used by management to plan, evaluate, and control all
activities within an  organization  to ensure appropriate  use,  and
accountability for its resources.  Capital budgeting is one component
of managerial accounting.

An index that helps to  answer the  question:   are the  future
savings/revenues of a project likely to justify a current expenditure?
Synonyms:  "decision rule", or "financial index",  or  "profitability
index",  or "capital budgeting technique".  Includes:   NPV, IRR,
payback, ROI.

The present value of the future cash flows of an investment less the
investment's current cost.  An investment is profitable if the NPV of
the cash flow it generates in the future exceeds its cost, that is, if the
NPV is positive.
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                                   NPV = CJF,
                                         1+k
                            _CF2   +	   -££*.-  I
                                \2         /i it \n
                                         where: CFj is cash flow in period 1
                                                CF2 is cash flow in period 2, etc.
                                                I is initial outlay or investment cost
                                                k is cost of capital or discount rate
Payback Period
Project Financial
Analysis

Project Justification
Process

Project Justification
Return on Investment
(ROI)
The amount of time required for an investment to generate enough
cash flow to just cover the initial capital outlay for that investment.
                                          Payback = Investment
                                                 Annual Net Income
Costing (i.e., calculating the costs and savings) and calculating cash
flow and/or profitability measures of a project.

A generic term for a series of steps  which are necessary to  get
approval for a project.

A document  prepared in the  project justification process which
comprising a written description of the project, a project financial
analysis, and a discussion of benefits  and risks  which  are  not
quantified in the financial analysis.

A measurement of investment performance, calculated as the ratio of
annual net income (less depreciation) over the initial investment
amount.
                                          ROI=  Annual Net Income
                                                    Investment
Total Cost Assessment
(TCA)
A comprehensive financial analysis of the costs  and savings of a
pollution prevention project. A TCA approach includes:
       a)      internal allocation of environmental costs to product
              lines or processes through full cost accounting;
       b)      inclusion in a project financial analysis of direct and
              indirect  costs,  short and  long  term costs; liability
              costs, and less tangible benefits of an investment;
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                                 c)     evaluation of project costs and savings over a long
                                        time horizon, e.g., 10-15 years;
                                 d)     use of measures of profitability  which capture the
                                        long-term profitability of the project, e.g., NPV and
                                        IRR.
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