United States
Environmental Protection
Agency
Office of Pollution Prevention
and Toxics (MC7409)
Washington, DC 20460
EPA 742-B-96-008
December 1996
&EPA P2/FINANCE Version 3.0
in Microsoft Excel Version
5.0for Windows
User's Guide
-------
-------
User's Guide
P2/FINANCE
Version 3.0
in Excel Version 5.0 for Windows
Tellus Institute
Copyright © 1996
-------
-------
Tellus Institute
P2/FINANCE
Version 3.0
in Excel Version 5.0 for Windows
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
-------
-------
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.
-------
-------
Table of Contents
PREFACE i
1. INTRODUCTION
INTRODUCTION •. 1_1
BASIC OPERATIONS 1_3
GETTING STARTED IN P2/FINANCE !!"!i-4
Elements of a Financial Analysis ]_j
Terminology j_j
Cost Item j_2
Cost Category 1_5
Scenario j_5
Analysis j_5
Project.... 1_5
Format Conventions j_g
P2/FINANCE Administrative Commands ......1-6
P2/FINANCE Organization "".'."'.'.'.! 1-6
Moving Between Sheets j_^
Moving Between Scenarios , j_7
Printing 1-7
Help Function j_7
Calc Button j_g
Excel Tips j_g
Spreadsheet Protection j_g
COMPUTER SPECIFICATIONS..... ............."... 1-9
Hardware and Software Specifications j_p
INSTALLATION i-io
2. STEP BY STEP INSTRUCTIONS: ENTERING DATA
PROJECT TITLE SHEET 2-i
Accessing Scenarios....: 2—/
Printing Scenarios...; 2-/
Accessing Help 2-1
Calculating. 2-/
DEFAULT PARAMETERS SHEET ".'.I'.'.'.'.'.'.'.'.'.".'.'.'.'.'.'. 2-3
Time Value of Money 2-4
Global Parameters 2—5
Inflation Rate 2-5
Discount Rate 2-5
Income Tax Rates 2-7
Depreciation : 2_g
Scenario Parameters 2—11
Name 2—11
Investment Year " '"'" ^-\ \
Lifetime 2-11
Start Year 2-12
End Year 2-12
Accessing Scenarios t 2—72
Printing Scenarios 2-72
Accessing Help 2-73
Calculating. 2-/J
INITIAL INVESTMENT COSTS SHEET l!!r//.!!!l".".'.'.".'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.".".""2-14
Salvage Value 2-76
-------
Tailoring the Financial Parameters. 2—16
Working Capital : 2-77
Accessing Scenarios 2—18
Printing Scenarios 2-75
Accessing Help : 2-75
Calculating. • 2-75
ANNUAL OPERATING COSTS SHEET 2-20
Escalation Rate 2-27
Tailoring the Financial Parameters. 2-27
Accessing Other Scenarios 2-22
Printing Scenarios 2-22
Accessing Help 2-22
Calculating. 2-22
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 3-4
Accessing Other Scenarios .3—6
Printing Scenarios 3-6
Accessing Help 3-6
INCREMENTAL CASH FLOW ANALYSIS SHEET .3-7
Accessing Other Scenarios. 3-8
Printing Scenarios 3-9
Accessing Help 3-9
INCREMENTAL PROFITABILITY ANALYSIS SHEET 3-10
Net Present Value (NPV) 3-70
Internal Rate of Return (IRR) 3-70
Discounted Payback. 3-77
Accessing Scenarios 3-72
Printing Scenarios 3-72
Accessing Help 3-72
Calculating. 3-73
4. CASE STUDIES
AN EXAMPLE OF A BASIC ANALYSIS 4-1
Conceptualize 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 4-8
Summary of Results , 4-8
AN EXAMPLE OF A COMPLEX ANALYSIS 4-25
Conceptualise the Analysis 4—25
Develop a Cost Inventory 4—25
-------
Collect Cost Data 4-26
Enter the Financial Parameters 4-33
Default Parameters for the Analysis •. 4-33
Enter the Cost Data ....4-33
Initial Investment Costs sheet 4-33
Annual Operating Costs sheet 4-34
Generate Reports 4—35
Scenario Summary sheet 4-35
Tax Deduction Schedule sheet 4-35
Incremental Cash Flow Analysis sheet 4-36
Incremental Profitability Analysis sheet 4—36
Summary of Results 4-36
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
-------
-------
Preface
Welcome to P2/FINANCE Version 3.0 programmed in Excel Version 5.0 for Windows. 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
Windows and Excel. 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.
-------
-------
-------
-------
P1/FTN ANCE, Version 3.0
Introduction
Introduction
Before you make a modification to an industrial 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;
• 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
-------
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 in 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 P2/FINANCE contains on-line help screens to walk you through the steps of a TCA analysis.
Help 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.
Obtaining Interested parties may request a free copy of P2/FINANCE Version 3.0 from the US
P2/ Environmental Protection Agency's Pollution Prevention Information Clearinghouse at (202)
FINANCE
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.
1-2
-------
P2/FINANCE Version 3.0
Introduction
260-1023 or ppic@epamail.epa.gov. The software also is available from EPA's web site:
http://es.inel.gov/partners/acctg. Some technical support is available from Tellus Institute.
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 analysis 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
ualizethe 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'vthat 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
Params. 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.
1-3
-------
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 Excel.
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 2-3 through 2-12 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
-------
P2/FTNANCE 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
Alternative Scenario 1. These changes to Alternative Scenario 1 also will 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.
Analysis
Project
A project comprises all data from the Base Scenario and
Alternative Scenarios and is equivalent to an Excel
worksheet file.
Project
Base
Alternative 1 Alternative 2
1-5
-------
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.
P2/FINANCE Administrative Commands
P2/FINANCE Organization
P2/FINANCE consists of a series of different worksheets, some of which accept data input,
and some of which present data summaries or analyses. The names of these sheets and their
abbreviations follow:
• Project Title sheet—(Project Title)
* Default Parameters sheet—(Default Parameters)
• Initial Investment Costs sheet—(Initial Investment)
• Annual Operating Costs sheet—(Annual Operating)
• Scenario Summary sheet—(Scenario Summary)
• Tax Deduction Schedule sheet—(Tax Deduction)
• Incremental Cash Flow Analysis sheet—(Cash Flow)
• Incremental Profitability Analysis sheet—(Profitability Analysis)
Each of these sheets is described in detail in Section 2 of this User's Guide.
Moving Between Sheets
When you open P2/FINANCE, you enter the Project Title sheet. To access a different
P2/FINANCE sheet click on the tab buttons at the bottom of the screen. Each tab
corresponds to one of P2/FINANCE's sheets. For example, to access the Initial Investment
1-6
-------
P2/FINANCE Version 3.0
Introduction
Costs sheet, simply click on the tab titled Initial Investment. In some cases the tab for the
sheet you want to access will not be visible on the screen. To locate the desired tab, use the
tab scrolling arrows at the bottom left of the screen. The inner set of tab scrolling arrows
scrolls the tab button bar one at a time; the outer set of tab scrolling arrows brings you
immediately to the very beginning or the very end of the tabs button bar.
P2/FINANCE remains in your current scenario (e.g., Base Scenario, Alternative Scenario 1)
when you move between sheets. In cases where you move to a sheet that does not have
different scenario sections (e.g., Project Title sheet), P2/FINANCE automatically takes you
to the top of the sheet.
Moving Between Scenarios
Within a given sheet (e.g., Initial Investment Costs sheet), you can move between scenarios
(e.g., Base Scenario and Alternative Scenario 1) by clicking on the relevant scenario button at
the top of the screen: The buttons say: Altl, Alt2, and Base. The Project Title, Default
Parameters, and Profitability Analysis sheets apply to all scenarios and therefore no scenario
buttons appear on the screen for those sheets. The Cash Flow sheet has two alternatives: a
comparison of Base vs Alt 1 and a comparison of Base vs Alt 2. The scenario buttons on this
sheet therefore say Altl vs Base and Alt2 vs Base. The scenario buttons will always be
visible at the top of the computer screen as you scroll through a sheet.
Printing
A Print button will always be visible at the top of the computer screen, even as you scroll
down through a sheet. Clicking on this button will bring up a Print Selection Menu that
contains brief instructions. Using this menu, you can print any sheet of P2/FINANCE by
clicking on the relevant print boxes. The print box for the sheet you are currently working on
will already be selected, but you can easily un-select it.
Help Function
A Help button always appears at the top of the screen, next to the Print button. Clicking on
the Help button will bring you immediately to the on-line help screen relevant to the sheet in
which you are working. If you are working in a sheet that does not have different scenarios
(the Project Title Sheet, the Default Parameters sheet, and the Incremental Profitability
Analysis sheet), you can exit the help screen by clicking on the Return to Top button at the
top of the screen. If you are using a sheet that does have different scenarios, you can exit the
help screen by clicking on any of the scenario buttons at the top of the screen. In either kind
of sheet (with or without more than one scenario), you may also exit help by using the tab
buttons at the bottom of the screen to select a different sheet.
1-7
-------
P2/FINANCE Version 3.0
Introduction
Calc Button
A Calc button always appears at the top of the screen next to the Print and Help buttons.
P2/FINANCE has a default setting of "manual recalculation". When P2/FINANCE is in this
manual setting, it will automatically recalculate only before you save, print or exit the file,
but not every time you enter new data or make changes to existing data. This means that if
you make any changes in the data you have entered or if you enter new data, these changes
are not automatically reflected hi the various mathematical sums and calculations shown on
the screens.
To tell the software to update its calculations, using the data changes you have made, you
must click on the Calc button. P2/FINANCE is set this way so that it runs more quickly. If,
however, you want to change from manual recalculation to automatic recalculation, click on
the Excel Tools menu, choose Options, and then the Calculate folder. Select "automatic"
rather than "manual". If you then close the file and re-open it later, P2/FINANCE will return
to the default manual setting.
Excel Tips
Although this Guide assumes user familiarity with Excel for Windows, some general tips on
Excel operations appear below.
P2/FINANCE rarely requires you to use the Excel menus. Instead, P2/FINANCE contains
special on-screen buttons for most of the common commands.
The Excel menus, however, do provide some important additional functions. To open a
P2/FINANCE file, click on the File menu and then select Open. To save a file, go to the
File menu and then select Save. To close a file, go to File then Close. To quit the software,
go to File then Exit. If you have not saved your changes when you Close or Exit, Excel will
ask you whether you want to save the file. You can also zoom in or out in any given sheet by
clicking on the View menu and then selecting Zoom. This will bring up a self-explanatory
zoom menu. P2/FINANCE's default zoom size is set so that the entire width of a sheet (with
the exception of the Tax Deduction and Cash Flow sheets) fits onto the screen. If you change
the zoom size, you may want to note the default size so that you can return to it easily.
P2/FINANCE will not return' automatically to the default zoom size if you have saved the
zoom changes.
In Excel, the status bar at the very bottom of the screen informs you of P2/FINANCE's
current status. When P2/FINANCE is ready for you to enter data or make other changes, a
"Ready" message will appear in the status bar. If P2/FINANCE is working, (e.g., moving
between sheets & scenarios or recalculating) the "Ready" message will disappear, indicating
that you must wait to continue your analysis, [note: if you press F9 to calculate (rather than
clicking on the calculate button), the status bar will for some reason continue to say "ready"
and allow you to keep entering data; if you do enter new data, however, the recalculation will
1-8
-------
P2/FINANCE Version 3.0
Introduction
stop. This is due to a problem in the Excel program. Using the calculate burton is therefore
recommended.]
If P2/FINANCE is operating in the default manual recalculation setting, the status bar should
display "calculate" any time you make a change to your file. This is a reminder that you
need to recalculate to make the various analyses reflect your new inputs. Unfortunately, the
"calculate" warning does not always appear when it should — again due to a small bug in
Excel. This means that you must be particularly careful about remembering to recalculate
before using any of the calculated figures.
If you pull down any of the Excel file menus, the status bar will give a brief explanation of
whatever function you have highlighted.
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 Excel Version 5.0 for Windows Version 3.1. Other
combinations of Windows and Excel 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.
1-9
-------
P2/FINANCE Version 3.0
Introduction
Table 1. Specifications for Operating P2/FINANCE Version 3.0 in Excel Version 5.0
for Windows
Minimum Specifications Recommended Specifications
Computer Chip
Windows Version
Memory (RAM)
Disk Space
Mouse?
Color Monitor?
386
3.11
4 Megabytes
2 Megabytes
Yes
No
486 or Pentium
3.11
8 or more Megabytes
2 Megabytes
Yes
Yes
Beyond these minimum requirements, P2/FINANCE runs appreciably faster with more
memory (RAM).
Installation
To install P2/FINANCE Version 3.0 programmed in Excel 5.0 for Windows, load the
Installation Disk in your disk drive and type:
[disk drive letter] :\p2fexcel
This action unzips the spreadsheet and copies one file into a C:\P2FEXCEL directory:
P2FINAN.XLS. P2FINAN.XLS is an empty template that must be copied for each project
analysis.
When you are ready to enter data into the spreadsheet, save the P2FINAN.XLS file under a new
name to use for a particular project. Note that the file extension, XLS, may not be changed.
Note: You may reinstall the software at any time to generate a blank spreadsheet with the
nameP2FINAN.XLS
1-10
-------
Entering Data
-------
-------
P2,/¥IN ANCE Version 3.0
Step by Step Instructions: Entering Data
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 in the Comments section.
Accessing Scenarios
The Project Title sheet does not contain different sections for each scenario. Therefore, no
scenario buttons appear, at the top of the screen.
Printing Scenarios
To print the Project Title sheet, click on the Print button at the top of the screen to access the
general Print Selection Menu. From this menu, select the Project Title sheet and then click
Okay. If you are working in the Project Title sheet, it will already be selected for you. You can
print other sheets by selecting them instead of or in addition to the Project Title sheet.
Accessing Help
To access the on-line help screen for the Project Title sheet, click on the Help button at the top of
the screen. This help screen describes the information requested on the Project Title sheet and
also provides general information on Total Cost Assessment and financial analysis. To exit the
help screen, click on the Return to Top button at the top of the screen. You may also use the tab
buttons at the bottom of the screen to select a different sheet.
Calculating
To recalculate totals and other analysis results after entering new data, click on the Calc button at
the top of the screen. P2/FINANCE has a default setting of "manual recalculation". This means
that if you make any input changes, they are not automatically reflected in the various totals and
2-1
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
analyses. To incorporate the changes, you must click on the Calc button. To learn how to
change the default setting or to read more about the Calculate function, see sections on
"Calculate Button" and "Excel Tips" on page 1-8.
2-2
-------
P2/FTNA1VCE Version 3.0
Step by Step Instructions: Entering Data
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:
Global Parameters
• Inflation Rate
• Discount Rate
• Income Tax Rates (Local, State, Federal)
• Depreciation Method
• Depreciation Period
Scenario Parameters
• Name
• default Investment Year
• default Lifetime
• default Start Year
• default End Year
Applied....
automatically
automatically
automatically
Apply Defaults button
Apply Defaults button
automatically
Apply Defaults button
Apply Defaults burton
Apply Defaults button
Apply Defaults button
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 in the same way as other data entries are applied,
i.e., as soon as you type in the desired value and then hit the Calc button. 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 click on the Apply Defaults button visible on the sheet. For
these parameters, selecting Apply Defaults deletes ALL prior tailoring of these parameters 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, clicking the Apply Defaults button 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 activating Apply Defaults, you can tailor the Default Parameters for each cost category in
the Initial Investment Costs and Annual Operating Costs sheets.
2-3
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
Note: Enter percentages as decimals or with a percent sign
inflation rate of 3.5%, type: .035 or 3.5%.
For example, to define an
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.
2-4
-------
PI/FINANCE Version 3.0
Step by Step Instructions: Entering Data
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 in 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
$104.50 in Year 1, $109.20 in 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
2-5
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
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 GJ. 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:
2-6
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
(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 hi 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.
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:
2 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.
2-7
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
where:
A=[F*(1-S-L)] + S
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 time, 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
costs are recovered at the end of the Lifetime of the project. (For further information on Working
2-8
-------
PI/FINANCE Version 3.0
Step by Step Instructions: Entering Data
Capital, see pages 2-17 and 2-18). 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.
4 DDB (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,
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.
2-9
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
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 in the year following the
Investment Year.
* 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.
DDB 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
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.
2-10
-------
PI/FINANCE Version 3.0
Step by Step Instructions: Entering Data
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
2-11
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
defines when Working Capital is no longer needed for the project and is available for other uses.
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/FMANCE 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, no
scenario buttons appear at the top of the screen.
Printing Scenarios
To print the Default Parameters sheet, click on the Print button at the top of the screen to access
the general Print Selection Menu. From this menu, select the Default Parameters sheet and then
click Okay. If you are working hi the Default Parameters sheet, it will already be selected for
you. You can print other sheets by selecting them instead of or in addition to the Default
Parameters sheet.
2-12
-------
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, click on the Help button at
the top of the screen. This help screen defines each of the financial parameters listed on the
Default Parameters sheet. To exit the help screen, click on the Return to Top button at the top
of the screen. You may also use the tab buttons at the bottom of the screen to select a different
sheet.
Calculating
To recalculate after entering new data, click on the Calc button at the top of the screen.
P2/FINANCE has a default setting of "manual recalculation". This means that if you make any
input changes, they are not automatically reflected in the various totals and analyses. To
incorporate the changes, you must click on the Calc button. To learn how to change the default
setting or to read more about the Calculate function, see sections on "Calculate Button" and
"Excel Tips" on page 1-8.
2-13
-------
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 of 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
2- 14
-------
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 DDB 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 DDB, 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.
2- 15
-------
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 (ha 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
2-16
-------
PI/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 and 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/FINANCE 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.
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.
2- 17
-------
P2/FINANCE 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 between scenarios, click on the relevant scenario button at the
top of the screen. The burtons say: Altl, Alt2, and Base.
The scenario buttons allow you to move between scenarios, differing from the tab buttons at the
bottom of the screen, which allow you to move between sheets within a scenario.
Printing Scenarios
To print a section of the Initial Investment Costs sheet, click on the Print button at the top of the
screen to access the general Print Selection Menu. From this menu, select the Initial Investment
Costs sheet and the scenario(s) you want and then click Okay. If you are working in the Initial
Investment Costs sheet, it will already be selected for you. You can print other sheets by
selecting them instead of or in addition to the Initial Investment Costs sheet.
Accessing Help
To access the on-line help screen for the Initial Investment Costs sheet, click on the Help button
at the top of the screen. This help screen defines each of the components of the Initial
Investment Costs sheet. To exit the help screen, click on one of the scenario buttons at the top of
the screen. You may also use the tab buttons at the bottom of the screen to select a different
sheet.
Calculating
To recalculate after entering new data, click on the Calc button at the top of the screen.
P2/FINANCE has a default setting of "manual recalculation". This means that if you make any
input changes, they are not automatically reflected in the various totals and analyses. To
incorporate the changes, you must click on the Calc button. To learn how to change the default
2- 18
-------
P2/FINANCE Version 3.0
Step by Step Instructions: Entering Data
setting or to read more about the Calculate function, see sections on "Calculate Button" and
"Excel Tips" on page 1-8.
2- 19
-------
P2/FINANCE 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 hi 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/FMANCE 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.
2-20
-------
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.
2-21
-------
P2/FINANCE 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 between scenarios, click on the relevant scenario button at the
top of the screen. The buttons say: Altl, Alt2, and Base.
The scenario buttons allow you to move between scenarios, differing from the tab buttons at the
bottom of the screen, which allow you to move between sheets within a scenario.
Printing Scenarios
To print a section of the Annual Operating Costs sheet, click on the Print burton at the top of the
screen to access the general Print Selection Menu. From this menu, select the Annual Operating
Costs sheet and the scenario(s) you want and then click Okay. If you are working in the Annual
Operating Costs sheet, it will already be selected for you. You can print other sheets by selecting
them instead of or in addition to the Annual Operating Costs sheet.
Accessing Help
To access the on-line help screen for the Annual Operating Costs sheet, click on the Help button
at the top of the screen. The help screen defines each of the components of the Annual Operating
Costs sheet. To exit the help screen, click on the Return to Top button at the top of the screen.
You may also use the tab buttons at the bottom of the screen to select a different sheet.
Calculating
To recalculate after entering new data, click on the Calc button at the top of the screen.
P2/FINANCE has a default setting of "manual recalculation". This means that if you make any
input changes, they are not automatically reflected in the various totals and analyses. To
incorporate the changes, you must click on the Calc button. To learn how to change the default
setting or to read more about the Calculate function, see sections on "Calculate Button" and
"Excel Tips" on page 1-8.
2-22
-------
3. Calculating the Bottom
Line:
Generating Reports
-------
-------
P2/FINANCE 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.
3-1
-------
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 2, 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 in 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
JDegreciation 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.
3-2
-------
PI/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 scenarios, click the relevant scenario button at the
top of the screen. The buttons say: Altl, Alt2, and Base.
The scenario buttons allow you to move between scenarios, differing from the tab buttons at the
bottom of the screen, which allow you to move between sheets within a scenario.
Printing Scenarios
To print a section of the Scenario Summary sheet, click on the Print button at the top of the
screen to access the general Print Selection Menu. From this menu, select the Scenario Summary
sheet and the scenario(s) you want and then click Okay. If you are working in the Scenario
Summary sheet, it will already be selected for you. You can print other sheets by selecting them
instead of or in addition to the Scenario Summary sheet.
Accessing Help
To access the on-line help screen for the Scenario Summary sheet, click on the Help button at the
top of the screen. The help screen defines each of the components of the Scenario Summary
sheet. To exit the help screen, click on the Return to Top button at the top of the screen. You
may also use the tab buttons at the bottom of the screen to select a different sheet.
3-3
-------
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
comer. 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 hi 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
3-4
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
For Depreciable Initial Investment Costs (i.e., those categories that have either SL, DDB, 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 after the
Investment Year for the cost category), P2/FINANCE reports a half year of depreciation (based
on the selected Depreciation Method) in 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 takes 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 + 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.
3-5
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
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 between scenarios, click on the relevant scenario button at the
top of the screen. The buttons say: Altl, Alt2, and Base.
The scenario buttons allow you to move between scenarios, differing from the tab buttons at the
bottom of the screen, which allow you to move between sheets within scenarios.
Printing Scenarios
To print a section of the Tax Deduction Schedule sheet, click on the Print button at the top of the
screen to access the general Print Selection Menu. From this menu, select the Tax Deduction
Schedule sheet and the scenario(s) you want and then click Okay. If you are working in the Tax
Deduction Schedule sheet, it will already be selected for you. You can print other sheets by
selecting them instead of or in addition to the Tax Deduction Schedule sheet.
Accessing Help
To access the on-line help screen for the Tax Deduction Schedule sheet, click on the Help button
at the top of the screen. This help screen defines each of the components of the Tax Deduction
Schedule sheet. To exit the help screen, click on the Return to Top button at the top of the
screen. You may also use the tab buttons at the bottom of the screen to select a different sheet.
3-6
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
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 3-10 through 3-12 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 in each year, subtracting the Base Costs from the Alternative Costs.
P2/FINANCE calculates the Total Initial Investment Costs in each year by summing 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 in 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 (i.e., 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.
3-7
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
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 tune 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, click on the relevant
scenario comparison button at the top of the screen. The buttons say: Altl vs Base and Alt2 vs
Base.
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.
The scenario comparison buttons allow you to move between scenarios, differing from the tab
buttons at the bottom of the screen, which allow you to move between sheets within a scenario.
3-8
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
Printing Scenarios
To print a section of the Incremental Cash Flow Analysis sheet, click on the Print button at the
top of the screen to access the general Print Selection Menu. From this menu, select the
Incremental Cash Flow Analysis sheet and the comparison(s) you want and then click Okay. If
you are working in the Incremental Cash Flow Analysis sheet, it will already be selected for you.
You can print other sheets by selecting them instead of or in addition to the Incremental Cash
Flow Analysis sheet.
Accessing Help
To access the on-line help screen for the Incremental Cash Flow Analysis sheet, click on the
Help button at the top of the screen. This help screen defines each of the components of the
Incremental Cash Flow Analysis sheet. To exit the help screen, click on the Return to Top
button at the top of the screen. You may also use the tab buttons at the bottom of the screen to
select a different sheet.
3-9
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
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 hi 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 tune 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 in 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 in each year (i.e., Years 0 through 3; hence, -$5,000 + $2,000 + $2,000 + $2,000) or
$1,000. 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,
3-10
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
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.
3-11
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
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, no scenario buttons appear at the top of the screen.
Printing Scenarios
To print the Incremental Profitability Analysis sheet, click on the Print button at the top of the
screen to access the general Print Selection Menu. From this menu, select the Incremental
Profitability Analysis sheet and then click Okay. If you are working in the Incremental
Profitability Analysis sheet, it will already be selected for you. You can print other sheets by
selecting them instead of or in addition to the Incremental Profitability Analysis sheet.
Accessing Help
To access the on-line help screen for the Incremental Profitability Analysis sheet, click on the
Help button at the top of the screen. This help screen defines each of the financial indicators
reported on the Incremental Profitability Analysis sheet. To exit the help screen, click on the
Return to Top button at the top of the screen. You may also use the tab buttons at the bottom of
the screen to select a different sheet.
3-12
-------
P2/FINANCE Version 3.0
Calculating the Bottom Line: Generating Reports
Calculating
To recalculate after entering new data, click on the Calc button at the top of the screen.
P2/FINANCE has a default setting of "manual recalculation". This means that if you make any
input changes, they are not automatically reflected in the various totals and analyses. To
incorporate the changes, you must click on the Calc button. To learn how to change the default
setting or to read more about the Calculate function, see sections on "Calculate Button" and
"Excel Tips" on page 1 -8.
3-13
-------
-------
-------
-------
P2/FINANCE Version 3.0
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 OH Burner Analysis
Initial Investment Costs
••> Burner Equipment (incl. delivery, tax)
In-house Engineering
Utility Connections (Electricity)
^ In-house Training
H> Heating Permit
•^ Related Equipment
•^ Installation Fees
Annual Operating Costs
^Maintenance
Operating Labor
•^ 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
4-1
-------
P2/FINANCE Version 3.0
Case Studies
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 in 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
4-2
-------
P2/FINANCE Version 3.0
Case Studies
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 oib 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 DDB 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 DDB.
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.
4-3
-------
P2/FINANCE Version 3.0
Case Studies
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 Oil 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 heating 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
4-4
-------
P2/FINANCE Version 3.0
Case Studies
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 clicking on the
Default Parameters tab button at the bottom of the screen. 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 (DDE) 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 clicks
on the Apply Defaults button 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 clicking on the Initial
Investment tab button at the bottom of the screen. In the Initial Investment Costs sheet, the
manager moves to the Alternative Scenario 1 section of this sheet by clicking on the Altl. button
at the top of the screen. 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
4-5
-------
P2/FINANCE Version 3.0
Case Studies
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 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 clicking on the Base button at the top of the screen. 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 clicking on the Annual
Operating tab button at the bottom of the screen. Once in the sheet, he moves to the section for
Alternative Scenario 1 by clicking on the Altl button at the top of the screen. 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 clicking on the Base button at the top of the screen. 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
4-6
-------
P.2/FINANCE Version 3.0
Case Studies
Waste Oil Handling - Vendor Fees, he defines a cost item, Vendor payments (10
pickups/year) and inputs a cost of $1,000.
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 clicking on the Scenario Summary tab
button at the bottom of the screen. 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 clicking on the Altl
button at the top of the screen. To make any changes to the data for this scenario, he either clicks
on the Initial Investment tab button for the Initial Investment Costs sheet or on the Annual
Operating tab button 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 clicking on the Base button at the top of the screen. 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 clicks on the Tax Deduction tab
button at the bottom of the screen. Once inside the sheet, he moves to the Alternative Scenario 1
section by clicking on the Altl button at the top of the screen. 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 clicks on the Cash Flow
tab button at the bottom of the screen. Once inside the sheet, he moves to the section that reflects
the comparison of the Alternative Scenario 1 and the Base Scenario by clicking on the Altl vs
Base button at the top of the screen. 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.
4-7
-------
P2/FINANCE Version 3.0
Case Studies
Incremental Profitability Analysis sheet
To open the Incremental Profitability Analysis sheet, the shop manager clicks on the
Profitability Analysis tab button at the bottom of the screen. In this sheet, he inputs an optional
time horizon of 3 years over which he can evaluate the profitability 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
PROJECT TITLE:
PREPARED BY:
ORGANIZATION: A
COMMENTS:
P2/FINANCE
Pollution Prevention Financial Analysis
and Cost Evaluation System
Version 3.0
Copyright 1996
Tellus Institute
Boston, MA
-------
8/1/96
DEFAULT PARAMETERS
Analysis Name: Waste Oil Burner Analysis 9/1/96 Default-pg1
Global Parameters 1
P2/FINANCE uses the Inflation Rate, Discount Rate, and Income Tax 1
Rate entered here for calculations on the Tax Deduction Schedule, 1
Incremental Cash Row Analysis, and Incremental Profitability Analysis 1
sheets, 1
Innatlon reflects the overall rate at which you expect prices to 1
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 ^i;: :a;Q.Q%|
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
tha opportunity to gain a return on another investment. Many
companies use their weighted average cost of capital as a Discount
Rate. For more tnfomiation on Discount Rate and its relationship to
inflation, see the on-line help.
Discount Rate ta'i. .?. ...15.0%)
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 > " .i!2;o%
State Income Tax Rate r^ - :- ,i6:D%
Federal Income Tax Rate ; '.•"• rS£233%:
Aggregate Income Tax Rate 29.5% |
The Default Parameters entered by tho user In this section can be
applied to the entire project file by pressing the button below,' Do not
orsss ttiif butjpn unless you are sure that you want-'thase values to
I apply to the entire project file! TVC *"*
tff^r^ «= a. f ^ /.WHV^ *^ '
i* . / <<%^ •* <•-'
\k ' ' J -**•
i » 1 V~S ^* 1 1
, ,
Scenario Parameters
P2/FINANCE allows you to create two alternative financial analysis
scenarios, which represent different investment options you are
considering. You can also 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
[Waste. eSCBviiner ., < * > i - " - > \
™,_,_^_m ,„ — „.„„-, ,.,, „,..,» __ „...,...„«»,.,.,, || inv. Yearf , OI Lifetime) JO I
-Th» Default Parameters entered by the user in this section can bo ' ' '
'' ,r t ri»Vah.~'-.-.yJ *c.»»fe*a.i**.-^- .rt illl rH^a^^faj&*a^^>afrffii^M'fae»*W»»e^rf6^tt ||
ippllod to tho entire project file by pressing tha button below. Do
nb$ pross tM* button unless : you 'are'sura''ithat5-yw|wint«»se
values to anpJy to th'i entire project fTle! .".;• •.'.'..•:. :-' ~4" ."•'•:- >\'i*> >'• ;•=••'
1 - i,M. a,:, rz:-:i\:,!:L,in]liiji,ftCl*3,3.aii!iiKii"i'BBEitsaAviSd:,,
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.
Depredation Method dab ';._
Depreciation Period ,„ i:;5.0
To specify Depreciation Method, use these abbreviations:
Straight Line SL
150% Declining Balance switching to Straight Line 1.5DB
200% Declining Balance switching to Straight Line DDB or 2DB
Expensed (tax deductible in the first year) EXP
Start Yearl 1| End Yearl 10|
Alternative Scenario 2
Name
I „ .- ~ « j, »\
Inv. Yearl 0 1 Lifetime) „ , 15 1
Start Yearl 1| End Yearl 15|
Base Scenario
Name
iCurrenl-OiliHandling Process > " \
Inv. Year|:" .;;:i; 0| Lifetime! " - 101
Working Capital (not tax deductible) WC II Start Yearl 1| End Yearl 10|
II
-------
INITIAL INVESTMENT COSTS - Alternative Scenario 1
Alternative Scenario 1 : Waste Oil Burner 9/1/96 lnv-AK1-pg1
•Initial Investment Costs
j
$ Amount Initial Investment Costs $ Amount
Waste Oil Burner and Other Equipment '„" ". Y ~ |lnstallatfon>ees " - l-rhir7C«Zls;
Dep. Method :
Dep Period '
' ddb Investment Year
5.0 Lifetime
Burner, stand,,and storage tank * ~ I "* "*
AChookBpandaircorrtpTessOT ~ -<, • * t* r '*'
Delivery dirge
t *„ *• *<.
* "^ A ^ ^ ^
J, ,? , ^ <*" " " *
, „„*" -r*' » " * J^_ **.rl',^
-. - -"*<"• (i^ar* - j
x i » >" ^, -** 4 », s /
- f ,y r *, v ""-Tfe
* *,/ v •* *^ ", * ^ * n tijr * ^-»
Salvage Value) '
TOTAL
'" ¥<. , ! - 0-
•* --•>• , =.10
- -"$41331
. '$2S1
j»' $292"
" e_ ^^
^ *"* - ° -
V
* ' *• ' !•*».>
" v — -" L "-<• '~ * ^ **„<•"•
" "ife^* ~ >x 4. ^*r,* *''„ 4r ~
Salvage Value | ;
*"" 'f ^
Dep. Method " „
Dep. Period
TOTAL
v r " 0'
r. \ "10
/„ ^55
s- ^ ' *
"^ 7»
^
"*- 'C,
»
$55
•» "7^***- ; ^ "^^*~*yj~-
. 'ddb Investment Year
„ 5J3: Lifetime
*" * " fC^Ji ' '~J~ ^ ^ *
~ S,\ t"^^ I ' f.%T£fef*'
<• -* „ ^- ' ^vMn*«3V. ""'^-f
_ " ""i,*., y * * '^^ ^ >"''-"» le'r'>±ra
*" \ "1: jva * " v ,3^ ,* "J"
Salvage Value |
i ."#,«;. i "
Dep. Method
Dep. Period
*v k-»"
TOTAL
--, " 0
, _ JO
„*„ «, "f
i, ^^
<-' - -_' , "
U,"r- 1r * %
"* * *V' ' vt,
$0
^c^^r: ^^^^
-, ddb Investment Year
5,0 Lifetime
" \~^ "3 "y^"" ft- - ^ ^
j •*—'"*- *" i.4 --^v "* "* t **~
* * •s*? >«&», *'^ i
' i •*" «J "* "'t9'^/?- ^ 1^
Salvage Value]; ^
— t."/<=s/
Dep. Method » ""
Dep Penod *
. q TOTAL
„ , _L <0
, ,, ^ >; 10
* - 3- 5-, — ^
- "
_ jk. "* ~
• "i -^ j J-V
$0
i vj; ^ m ^ ,7k: ^^F*- =::.-
-- ddt Investment Year
» 5.0 Lifetime
"«.'Tf *v' •> " ~-a> ",
r~ »* *x "" "" '"VK,^ %•*" 1tKs«j A
i."*"' , " 5'~J-.fTjt *»' "t
Salvage Valued ,
TOTAL
: jj ' o
JO
L < ^K^'-_J,'"^
«t
$0
Dep. Method iddB Investment Year
Dep. Period 5.0 Lifetime
EquipfnentwsiallaHon "* ' *!
~" I, „ ~ % f " . » • ^tv^r' i."
"><-"' « ' *i_ ^-'^X1
"*"*-- =t ~ ' * „-'». "£Ql
, ;"- ^ ' --s. - .,, -,• ^*
-Vs , >,^ ;. ^ l^S"
J -*" A (. Js.t s ^
t ' ^ "" „ ** f-
^ ? ! ^ ** ~" "*" ^"^. s*
Salvage Value I TOTAL
K " "0
''"JO
"„ " * "®70
, ^ ••» t ^ T
< , "* *•'* J
-s
i ,
V '' '^1«
' ' r j «"
_j j- x ^ ^ *jp
$970
Heating Permits " "^ 7 ^" ^
Dep. Method " exp Investment Year
Dep. Period 0.0 Lifetime
One-ifrnefee * _ , *
e ->• * * " ",
"~ 'XB'
' "
,-„ J"»»
f .-. ^ '
Salvage Value h TOTAL
0
10
" ^ $89
-
i *-
' **
t s -
'
$89
-;; , ,- ,.--_,. ~.;t 5
Dep. Method • ddb Investment Year
Dep. Period ,,50 Lifetime
? ' i . * , „ ^
»a> ^ ,». ^ -5 \ * * ^ v,» ' "'^ »"«f
^1 ~m ^^ * ^ ^ s" f ^ ^?&
', i I -'.-,'' ! """'v
•>. ^ «. « 't** ""*•' « »« i x ^/ ^ i ~--vi
Salvage Value! * TOTAL
' i'j», 0
, •> - 10
1 !.*" "X-*,
i "ir- '
,T ^.
""" '
*~" * * 1- '>
$0
~*T- - •' r -, "I'-'^-V^V^
Dep. Method ^ . ^ ddb Investment Year
Dep. Period 5.0 Lifetime
^K *~1 ^^o— "~ ' V^^,1
« i- ~ ^ l ^^r * >« *^ t v-^ 1»
1 "**, " J""- ^ 5 ^<>>** ^ ^2"
, ^ > , 1 i ' _ "• j fj £ * "•
Salvage Valued ' TOTAL
* « - '0
- "*"*•'-" ""10 '
1 ,r —
- -?"
* ' > P-
*. -.>-„ »~
$0
- ,^;', T-*--- '— • s 1 -^-^i- ^,Tjj-r-7^
Dep. Method 'fddtj Investment Year
Dep Period ' " 5.0 Lifetime
, -* , - -. »-/ , — ^^ ,
s , " * • "Ci ~^~Z*s
*• * ~< *• '^, fr
Salvage Valuel TOTAL
r ' * "o
~ tfO
. ," -' ^
k »
*. '"••'••«,»
$0
-------
Dep. Method
Dep. Period
111 '"I"'1 " "' '"' ' j »' ii"iii" •
^ „ ,
Salvage Value) .
,
Dep. Method
Dep. Period
Salvage Value)
'.',.•. '.'...f..' '.::, '•.¥*•':*••&
ddb Investment Year
' 5.0 Lifetime
-' '•' • •<'-" :\ ^:""v"":S,"
"• . kv:'-"~ :•'•*'* '^iii^'Si,^
',/;•! V"*;^^"rY!T!;!X;gi£!
7"",™:' :!" iSJ';"1 I"; j'StKi'S^g!^
. ,. :','„! >L3.L;i'i.,'lf.'A.-rj£3S§?;
1 TOTAL
'•v ', .;M''*s,4./i<, ;• -l;;;i'i'
ddB Investment Year
5.0 Lifetime
", < ' ..', "'"'- '• ,"•' '.^^.".^^JfS
.. " '..-. ' »; ..,;v '',»•: 'i'l"l?:::'S .S'
. _ ,; ::,•''•:; ,')":;<; i'-.-'rUVi^Vf'
• •. ."t : . l,ty •\:-£7*i'&'.
TOTAL
fejglsfsllSl
'•V •"•*••'- • '• i''*-0
'•:.• •:.•:••"• -.r.:^fta
• .•". .".•"•"'•:
F, . ^. -"': ;""J|;_| l;"'r'^1: -" ^'
iJ« lii^iiS'i.ⅈ.!
;i:;-'iil'*t;,'£;Eri
^'^™i:SiSJ
$0
ci.«sis=i:,sfe:li
,;,7- ;.,--,.; •••,,nJS1[J-;
*, .'" -,;-:-.-L!,,10;.'
., - *,-. .?,*~^ .^r^,,;,-^
:;; '..•.^'-.••••"^^ .
'...1i:i.1:u'.'';-'Ji~--.,*'.::
-^ -"•'•'•';:' '~* • ";-'^ ':
$0
* '
Dep. Method
Dep. Period
V
„
Salvage Value |
Dep. Method
Dep. Period
Salvage Value) „
rf- *f V%", JJTo^«7'S«3*
ddb Investment Year
SO Lifetime
' ' fiiT in "!**"'•
* _ */*"L!2r«*
trt.
TOTAL
•~^» -T^lS
ddb: Investment Year
5.0 Lifetime
,~ " "~A%
, *
s Jr
"9 ' J3
TOTAL
lnv-AK1-pg2
«"^i>«i^ s-"^
i, fJ-,0
, '10
' !• »
f -f «.<
' . i'
1 t
» J-
$0
L'l^wxp
0
10
t
s:
$0
-------
INITIAL INVESTMENT COSTS - Base Scenario
Base Scenario: Current Oil Handling Process 9/1/96 lnv-Base-pg1
Initial Investment Costs $ Amount • Initial Investment Costs $ Amount
Waste Oil Burner and Other Equipment :
Dep. Method
Dep. Period
Mo iHimsr^oji otwGf ©ci HI
,, „ ^ ,# * $^ j
t? _ "**
K- " •" *" ^ ^;f^2? J^ r^ J"~J
" 1" I' ~ •*" "*'* * is?" f a^r •"Si"'^?'">
"" J""r ',* ^»" v- srJJ*^ JTfe*?* i
^ * ** -- <, / "<%.* ,*1, * ""
t ^ '< tf °f •**, ,. 7 | « •>-* ?^3"77
Salvage Value) * *-*
TOTAL
J^ 5" *^v~f®
L. """'*"'" $0t
^ -1 "v, ^~-
rJ"^Tj»^. *i".
=, *-t 'f0-1"
' ^ "
"VL. !<**> >f t-
, t ^^ ,
-r
$0
Start-Up Training Labor
Dep. Method
Dep. Period "
4db Investment Year
5.0' Lifetime
No start-up iraiOHjgJabon" r"^™~ ~< f"M~ " 5>-j
* -, i » *tr -» *•* i. ./" ** r •- ^ "La
"*T ^"'^"*t'N */ l*^°"i» '"S?"*"
ft ^ •*„ -
•*.•? i^feS -T >."*" j •"\>fil
^ «. ^^^ ^£~^&ti
*••*> »
Salvage Value! « "
Dep Method ••
Dep. Period
" >.-. ^ * 7 r
>•
Jf ^^sT "^""S^yl"*"
TOTAL
•-..•" -yrO-
-10
"" _ *" * $0
3 <~
,T *"'- - -P
r * " t.
-v. > r »
^ "r _
$0
. 'ddb Investment Year
5.0- Lifetime
'- -1^, ^ r - "™
* /,"" "*"*» I-' 7>sJ^ J^v 4^,-s"5
*••** *. ~ 1^.' *,»^A'i'!-*i-
Salvage Value |ii
Dep. Method
Dep. Period
- *1 TOTAL
1 " '"" I *0
'» ^ , *t0
, ,-»,.
_ ^, -i"~
^ " •« * A
' i * i"
$0
ddb Investment Year
5.0 Lifetime
«. **" «s** fl- * i, V -« i
^ * 4 ""? t /** ~ „
„ -k -v Vu~ „ if L *"- 5« .j* „ '/ •
' i * T v-t ^ *• -, -* *i- f
Salvage Value|
Dep. Method
Dep. Period
*C „
TOTAL
0
;- " 10
r /-™^ ^™
,r*-1 * ?.
* -v'~_
IJW , Jr
$0
•SeidB' Investment Year
5,0 Lifetime
» Si"- •" j*.v* J -r. , -y
•• i J: *'*«"•*'' "**"^- •*'
*S .' »,- .3 , ^f_
Salvage Value)
TOTAL
- ->vJO
-~ - „= 10
r'^.^t , >, •
^.
"• ~S $•
$0
| Installation Fees
Dep. Method ^
Dep. Period "• "
- ddb Investment Year
U5-0 Lifetime
NoJisfedfafioRfdes " t " *' -«^^rf?
. -,A? ,,! v #^ „ *.,y^"V t*^'
' -1"""— , * ,*-c v i'>~ '^f
__J^ ^ « _, " ,
• ' ." ^r, I^T- (
, * * „ ^ > -^ - It'Sf'j
„ ''"w'-t, ?- '-, ' * ' ,' ' P^^ij
r f -^
' - , <•,, "„,*•- ~V
v, , ^ ^ <-"" _ j-x-fjll
Z, "** ' ' - ',**" ,~K "» ij«<
Salvage Value!
•* TOTAL
J ^- . 0
i s\~'~ ~W.
' ^ f^"fC -jo"
" ^A J'*w^
.^Xa?- " h " -
r v ^ lrf,*v_
j'fc /> -"""A
*" X" jif T ft
*" ^-' ^i
V7^-
WJ.T ',isr
$0
(Heating Permits
Dep. Method ' 1s<
Dep. Period ' '
ddb Investment Year
". 5jO Lifetime
Mb fieaBng permit ^J „ 3. * --.r?.,
'S." „'"*
^ „ * "« " * -??•
~~ r_< I *• „* t > I "-^f.
VJ ,•" ~ , 55,
? \
Salvage Value |
' ' iW,
TOTAL
« !<3
i '" C 10
, , ,^5
< >',
* —
""" * *
" >- * l)f
*
$0
Dep Method =•
Dep. Period v
» ddb Investment Year
5,0 Lifetime
-^ r ' ^ . » •>,"»-«.
»' « * ^~ «. '-^^ *
" - ;£ " " I *>, / / ,V " 1
"• " " " <• -.v.
Salvage Value |
Dep. Method „
Dep. Period
-" e
TOTAL
50
!t ,
-*"
4 " I-** >
$0
s ddb Investment Year
* 5.0 Lifetime
* <,„ > -\ "v" ^^ \j,<
,-*«» vjAyii r , ' ' " "~T • ~ t ii.rr.ir *•-
-'"'"" " J * t, *> ,>,;>.', ' -iL: i.
- T ' ""- * » f / ' ,- "!t\''->'*j-s*
Salvage Value [ i
Dep. Method
Dep. Period *
'
~ - 7 TOTAL
•• ^vlO •
>, « «
- _n; yf ^*
\ J f.-
* Z. ±*.Jl v
$0
Slab; Investment Year
"" 5.0 Lifetime
' , "r
'--^^ - , ~-f , " - •** M **V "
* < ™ ' "* ~ i *^
Salvage Value
TOTAL
70
"^ i "H
—
r J" »
$0
-------
Dep. Method
Dep. Period
Salvage Value)
Dep. Method
Dep, Period
•
Salvage Value I
ddb Investment Year
5.0 Lifetime
A
". j B m*bv.H
_
H|ll
K
„„! " , qt
TOTAL
ddb Investment Year
5.0 Lifetime
..
, .>_ i
i r ,
TOTAL
0
. 10
$0
' 0
10;
.
$0
Dep. Method
Dep. Period
>*.
*
Salvage Value |
Dep. Method
Dep. Period
-
&
••
Salvage Value f.
3db Investment Year
5.0 Lifetime
.
* ., ^-
- « •-"". " «•" -fi£^Ss
i - Pv ^filSi
, <; » ' ,
TOTAL
dd& Investment Year
5,0 Lifetime
^j" I
f !•
if "r« 5,,ty*j^jf
Mjat4 ^ * 0
i , * 10
* "T"'
**" ^
* " *, "- -J
-I » '
$0
-------
ANNUAL OPERATING COSTS - Alternative Scenario 1
Alternative Scenario 1: Waste Oil Burner 9/1/96
OD-Alt1-pa1
Annual Operating Costs
$ Amount Annual Operating Costs
$ Amount
{Waste Pit Handling -Vendor Fees
Escalation Rate| 0,0%|
Start Year
End Year
Nc-vendor«fees for disposal ofwasteojl' ~ „ ^*
.'* v- * ^J^-H* * % f * "" >
! •>
~ •" „ * 2 •• l A** * " jfif"1*!* X?-*--
- ^ : ^t v-f/ •--*
"j1^* ^v!-1 -^ 4.^ ^>
-* } 5^ J CV'"« i J"" A*t-
fl . 1«u-- t" v*" "K v-i'''*
•% ' 1 Z f ~Je^r i l*~" *l
"f3f * ' , . ~* .* *•„ , V It? "*".,'>
JL * "'««* H *^< ,~~
TOTAL
,, *,„ t
-,10
! - ~, " * t"i& '
^ 'Jit-""'
I1-" ZZiwrt~.*~
~- "! • 1>
-"J""- -*!,,""
tSss* -^ i
,-^.it, -sff
**~*-* ^^
•.><>'< "Z '3* *
$0
[Heating4 "";
Escalation Ratetl « aO%|
Reduced gas faoiter costs^ •> - . r
Start Year
End Year
*%• ? ' f *_
^ *.* ^t^^/' "" **' '^Ht'^sJ}. v,
-" *""*"' , * „ f ^^^^ »"%*;
f " o/^ ?" "J * all .* *~ 43?- -
* •" ,(.""•--> Af '. '"""* -»•»•»•' ^* .
•,' i ! JL l \ * -v ^ aStMl '^^ '
TOTAL
«-i "1
* -• » .jto
t ""„ $44^6rA.
», ~ »* * «7S,
f ^ ^r
? "** f ^ ja
AT _»'s-.*v' » *
"i* ^ *
$14,660
•^3^^
Escalation Rate fl 0.0%| Start Year
End Year
•v " T" -,„*..* '~^" &*<„ J^.1^*^
"r ' ,% 'l!a: *-f *^5»'< W %}
" * -J C*~vL -• "-1* ^* JCrl
> -* »--*ji >"**)>*" !*• ^-* -is-JL-, ,
S 1 *'<• X *TjS2S &"i.-. ^1 ?W»
TOTAL
- f* v/ *-^|
r *""~*, -1O
^ "-"•&-" , ww
»*, « v v
*-^ *- ^-^ -^
* *. n^ '
^ ~ tr* ™
$0
3^ , nf. ^^^ _2T
» •»• ^t.^; ^
Escalation Ratetr , , 0!0%|
Start Year
End Year
x- * J« '*-'^f:- ^^iJ^jfS-suJflL *'•''"* ''.jiV:
^ ^ ^^ ^ ^ -. -»ft~>,T V»^ ^ c^^jir^rtLl«l^4^
> ^^*M /rtv ^ » ^ _3-?~-*r* i^M:^ ^f ""'j^J^C'
' J7 V '>-/•< -•^i5"_" Ti ^%,"Fi>-1l'*ji£jx.'*'
TOTAL
_ LT . .* *tO
„-£*" ' , ^
r" ^rSf ifi
^"^ "*
alt^.^,' •> "*•
$0
»~-* I
l~< f ^-
Escalation Rate} ,::
,.0,0%]
Start Year
End Year
*.. i fi J*& , ^,»"C •* > w-'-wr' ~ * s
» , _•* l ^ - "*£?
,-»> - " •»
« NL?""" "^^t
TOTAL
— *^ -^'
, ,,r3v fO
T^- ~ t-^ ~f.
, As •$ -tot .iv, ^ ^
_ v
$0
tscaianon
TOTAL
^^r
Escalation Rate):'
' 00%| Start Year
End Year
i '„_„*- A £^ *»#%** a
J^ J>j{^ » „ "* ^s ,
- ^t,a^^ - •> "TVl,ji,ii'I ^J
l^-» . -"»• * ^""^t*l " " ^ V'Xui/TL*
v --. * 5 ' fv. •* ^ ^<*J^ '"'ffcS
TOTAL
~~ i ! 1-
r ^ " to
-is * *^
^t,-**-^
: ^ „ , *5^ ;
ffe I> u. * i-
$0
Escalation
Escalation Rate
TOTAL
-------
-, ........ , ,.-„_„ ,^_,
Escalation Rate | 0.0% | Start Year
End Year
. -
'- -/•,. « " ,ff "is
I ' ^ |L ^ ^ ^ jU^
^
-i w. Jr
; .-'-""" "*'
TOTAL
i ..--.. r**
Escalation Ratel 0.0%) Start Year
End Year
, "
—
"- • -
- . _
TOTAL
r"" •^'frr^-m^v •— •< q^
9 "" B* *
•t
10
^
*" !
'
$0
"" jn 4^ Kt
1
to
SO
-
[1 ( f, tt% J.^**
f ~ ^rs\si
Escalation Rate | 0 0% I Start Year
End Year
, >i 15
f ^ * ^v*, -"* -W1'
M&r*1"*
n.f %ni " "^jt1-
•VA
H"-«r ' sTf'
TOTAL
t( T» f ' ! 'SET''. 2'
Escalation Rate f 0.0% I Start Year
End Year
» \ h « ^
H J^,i I'll**
^" *' f^
1 1 ' -«•
TOTAL
Op-Alt1-pg2
» f --1 '"^k.»
•* t* j t i
_ ^ "1
"• - 10
^ t.
n — »?''
*• ^ '
''"«*/ f
*-,V jT
r 1 -^^ v &
$0
i
no
/*• «^ ,
^ c
^ f •»• jf if
-------
ANNUAL OPERATING COSTS - Base Scenario
Base Scenario: Current Oil Handling Process 9/1/96
Op-Base-pg1
Annual Operating Costs
$ Amount Annual Operating Costs
$ Amount
[Waste Oil Handling - Vendor Fees
Escalation Rate|_
Start Year
End Year
Vendor
TOTAL
$1,000
[Heating
Escalation Rate 1 !J 0^0%1
Start Year
End Year
' * A,"" ^ "* "•" * * s of " |£vl S* ^* » ^ * •
TOTAL
'• ~. ». "f- $
• ^f ~ A ^.1-0
~f <^ \ J: *•
» » v i 7-
'„ *-»-'-«. •»
i>'-t.^Cr '
/
$0
Escalation Rate
Escalation Rate[____r_QjC%j
TOTAL
[Waste Oil Handling - In-house Labor
Escalation Rate|« ? 00%|
Start Year
End Year
FiveMurs in-house iabcir
TOTAL
*„, JO
$150
[Maintenance
Escalation Rate! 0.0%| Start Year
End Year
No waste oil batBerfoTBainiain » "_ tV IL-£L
-*•«£. , J ?""• ^ -y ' , 'SSf-"*
" V"*"4( % »4. «"« ,<°v>>i * ** "¥"1
"" """'> "'' ' J ' -» A "•«»£"
4*' *- ^~ -«- - r v vp r
^ 7 t * *« , ' "~ .. 1 i "*~ ~
TOTAL
^ f^ ,4
„ " , ^ ,40
" '- J «.»fc$"0.
•» ~^. ^i ,
7 f-
•* C' '
c, »•
^. "-
$0
Escalation Rate! =' 6.Q%|
" s*.f »&*. H' ^ St* ^-, .1 '"•*'' ~i*
Start Year
End Year
>>» "'>3>'V
t'-"^« Jilf^c
TOTAL
'i * ^* ?T_#
-' J/1-* s TO
, ^, i f *'"_ t
v» s,>% x r -
/ ^14- ^a
' „ _- - J ' :
$0
Escalation Rate) 00%|
Start Year
End Year
* * "i ^ ._ -» -, ^ • - f^f, s>* ^"-^ > »'
<•-" "V r ^~ ^ ? "j, * t^r.J^S ?ra
W '
TOTAL
"~ ~ ~^ 1;
, /*'»^L ,-10
~ , -.j
• <./ " »* '\
S? *""",'
i 1 i •*"«• '3t
$0
Escalation Rate 1 0 0% |
Start Year
End Year
( "" i!^ > "* * ^~ > ih*V*"
f^ j. ' " /- "c ^ >' ?!;-,*•?
- ' ' t *• '. » -v* "^~"
TOTAL
«• •» ^"^Jf;
5 •„ re
^ s —- -,, ^
«• t
•^ v s , 1 ~*
$0
-------
.
Escalation Rate| ,..: Ad%| Start Year
End Year
• ' •'•••:.v:^**ii.-"-^;ir!!iu?*"£SS£
: .; ', ,; ,; '•:,; :;: r.; \^^^^&Ss&KSI&lSI^S^St
: -.••. .-• -! T"-: -^^^fSrTsss^rss
i ., j "-• • , j.: •i;.'i.wi-i!.-!*p.)*'..'.B»»«!AfiS(i'iRl(ei;
-• " ,'- ": : * '' r-aw- **f '—*'':-"
TOTAL
Escalation Rate I JODSffil Start Year
End Year
, , =»-. r
: "~ _ "t " -
. . " .V - . . |l "«-' J4^, a V 1 1.
' . '.'. • ,,,i.,*..J i«J* !L,.,«,,,i,&/
TOTAL
".f^.V.'/A'.^.'-rJ
^:,™S333B
sasssss
*r;S;:*|jjSB5fjti».;ijtft
sas^siss
'l's-:.FSi'ffi$$'}\'t:.
" i- v1:1*''1,11 i!;i^ii!'"
$0
...'^, ' •:',:-.• -L_^ Tt'-..-3,
:i-:;'..;c;Sias
"' •T"".'?^)'
V1J?. '"'/j^
" ^ "jEFs*
j<, iT,.. lau'iiiS!.
$0
Escalation Rate | 0,0%| Start Year
End Year
"*1 P'p'if-
*~ ^w^kiSftC^ SE
-* - ti ( r<
- ' 4fx-rf Z ^f^J f<>
> . - <• .* <»
TOTAL
Op-Base-pg2
' * '1.
* '> .^-fO
**» ' •*>!!
Ti ? 4 C 1-™.
Tkf|«'« *1'*1
I, >i wf Jl •
*VT^-
L ' ^C
$0
, >' 1
'd x, .10
sT " « -'I
I *
j -*~-iy
$ * „* 1* '
$0
-------
SCENARIO
Alternative Scenario 1: Waste Oil Burner
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
li
SUMMARY - Alternative Scenario 1
9/1/96
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
Summ-Alt1-pg1
Salvage
Value
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Depreciation
Inv. Year Lifetime Period
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
5
5
0
0
5
5
5
5
5
5
5
5
5
5
Method
DDB
DDB
EXP
EXP
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
Start Year End Year Escalation
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
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%
SCENARIO PARAMETERS
0.0%
15.0%
Default Investment Year
Aggregate Income Tax Rate 29.5%
Default Depreciation Method
Default Depreciation Period
ddb
5
Default Lifetime
Default Start Year
Default End Year
0
10
1
10
-------
SCENARIO
Base Scenario: Current Oil Handling Process
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 0.0%
Discount Rate 15.0%
Aggregate Income Tax Rate 29.5%
Default Depreciation Method ddb
Default Depreciation Period 5
SUMMARY
9/1/96
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
- Base
Scenario
Summ-Base-pg1
Salvage
Value
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Depreciation
Inv. Year Lifetime
0 10
0 10
0 10
0 10
0 10
0 10
0 10
0 10
0 10
0 10
0 10
0 10
0 10
0 10
Start Year End Year
1 10
1 10
1 10
1 10
1 10
1 10
1 10
1 10
1 10
1 10
1 10
1 10
1 10
1 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
Default Investment Year
Default Lifetime
Default Start Year
Default End Year
0
10
1
10
-------
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 InvestmentCosts
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
9/1/96
0 1
5,884 0
144 0
0 0
6,028 0
983
- 4,914 3,931
194
970 776
55
55 0
89
89 0
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
1,177
144
0
1,321
Tax-Alt1-pg1
2
0
0
0
0
1,572
2,359
310
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
1,883
0
0
1,883
3
0
0
0
0
943
1,415
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
1,130
0
0
1,130
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
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
o
0
0
0
0
0
0
0
0
0
-------
TAX DEDUCTION SCHEDULE
Alternative Scenario 1
Atttmative Scenario 1: Wast* Oil Burner
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial InvestmentCosts
Tout Initial Investment Costs
For *ach 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.
Wsste Oil Burner and Other Equipment (DDE)
Initial Investment Cost and Remaining Book Value
Installation Fees (DOB)
IniUI 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)
Inital Investment Cost and Remaining Book Value
(DOB)
Initial Investment Cost and Remaining Book Value
(DOB)
Initial Investment Cost and Remaining Book Value
(DOB)
Inital Investment Cost and Remaining Book Value
(DDB)
initial Investment Cost and Remaining Book Value
(OOB)
Initial investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DOB)
tnital Investment Cost and Remaining Book Value
(DOS)
Inittal Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depredation
Expensed Initial Investment Costs
-Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Tax-Alt1-pg2
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
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 SCHEDULE
Base Scenario
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
9/1/96
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Tax-Base-pg1
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
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
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
-------
TAX DEDUCTION SCHEDULE
Base Scenario
Bate 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 depredation, The bottom line tracks the Initial
Investment Costs for aX categories, plus th« Remaining
Book Value for depreciable categories.
Waste Oil Burner and Other Equipment (DOB)
Initial Investment Cost and Remaining Book Value
Installation Fees (ODB)
Initial Investment Cost and Remaining Book Value
Start-Up Training Labor (DDB)
InJUat Investment Cost and Remaining Book Value
Heating Permits (DOB)
Initial Investment Cost and Remaining Book Value
(ODB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
lodwM Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DOB)
Initial Investment Cost and Remaining Book Value
(DDB)
IniUsI Investment Cost and Remaining Book Value
(ODB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
IniUI Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
Total Depredation
Expensed Initial Investment Costs
-Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
Tax-Base-pg2
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
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: Waste 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
INCREMENTAL ANNUAL OPERATING (COSTSj/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
9/1/96
0
4,914
970
55
89
0
0
0
0
0
0
0
0
0
0
6,028
6,028
(6,028)
(6,028)
(6,028)
Cash Flow-Alt! v. Base-pg.1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
4
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,000
150
3,148
(220)
Q
0
0
0
0
0
0
0
0
0
4,078
4,078
678
0
0
3,400
1,004
4,078
1,004
o
o
0
3,074
10,021
6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
o
0
0
2,974
12,995
7
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
Q
Q
0
2,874
15,869
-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Analysts Name: Wasta OH Burner Analysis
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
W«Ko Oil Burner and Other Equipment
(retaliation Fees
StarHIp Training Labor
Heating Permits
Total initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Waste Oil Handling - Vendor Fees
Waste Oil Handling • In-house Labor
Hewing
Maintenance
Tout Annual Operating (CostsJ/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (CostsJ/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 {CostsJ/Savings
-Income Tax
-initial Investment Costs
4 Recovery of Working Capital
+ Satoaga Value
AflW-Tax Ca*h Row
Cumulative Cash Flow
Discounted Cash Flow
Cash Flow-Altl v. Base-pg.2
8
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
9
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
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
24,490
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
• o
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
-------
INCREMENTAL PROFITABILITY ANALYSIS
Analysis Name: Waste Oil Burner Analysis 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/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 | ^A-yiSLj.&J
This analysis calculates the incremental profitability of each Alternative Scenario relative to the Base Scenario.
Base Scenario: 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
#N/A
9,631
#N/A
9,631
#N/A
1,513
#N/A
Internal Rate of Return (%)
Scenario Name
Years 0-5 Years 0-10 Years 0-15 Years 0-3
Alternative Scenario 1 Waste Oil Burner
Alternative Scenario 2
45.9%
#N/A
52.7%
#N/A
#N/A
#N/A
29.7%
#N/A
Discounted Payback (years)
Scenario
Name
Payback
Alternative Scenario 1 Waste Oil Burner
Alternative Scenario 2
2.28
#N/A
-------
-------
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 hi Appendix A of this Guide.
Table 5. Cost/Savings Inventory for Batch Still Solvent Recovery Analysis
Initial Investment Costs
•* Building
•^ In-house Engineering
r> Contractor Engineering
•^ Equipment Purchase
(including Installation)
Annual Operating Costs
^ Virgin Raw Materials Costs
T> Off-site Hauling & Disposal Costs
•^ Waste Shipment Manifesting Labor
•> Direct Operating Labor
•* Utilities
•^ 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 •*). 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 in the
analysis to illustrate that she has considered them in thinking through the project.
4-25
-------
P2/FINANCE Version 3.0
Case Studies
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 in 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-
4-26
-------
PI/FINANCE Version 3.0
Case Studies
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 in 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.
4-27
-------
P2/FINANCE Version 3.0
Case Studies
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 hi 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.
4-28
-------
T?in?INANCE Version 3.0
Case Studies
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 arresters).
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.
4-29
-------
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 DDE over 5 years.
Training Costs - Inv. Year 1
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.
4-30
-------
P2/FINANCE Version 3.0
Case Studies
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 in 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 hi 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 hi 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
4-31
-------
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.
4-32
-------
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 clicking on
the Default Parameters tab button at the bottom of the screen. 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 DDE 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 clicks the
Apply Defaults button 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 clicking on the Initial
Investment tab button at the bottom of the screen. In the Initial Investment Costs sheet, the
manager moves to the Alternative Scenario 1 section of the sheet by clicking on the Altl button
at the top of the screen. 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.
4-33
-------
P2/FINANCE Version 3.0
Case Studies
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 -
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 clicking on the Base button at the top of the screen. 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 SO as the cost.
Annual Operating Costs sheet
The environmental engineer opens the Annual Operating Costs sheet by clicking on the Annual
Operating tab button at the bottom of the screen. Once in the sheet, she moves to the section for
Alternative Scenario 1 by clicking on the Altl button at the top of the screen. 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/FMANCE automatically copies these cost category titles to the other scenarios.
4-34
-------
P2/FXNANCE Version 3.0
Case Studies
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,
under Virgin Raw Materials (Start Year 1), she types an entry for Product A raw materials
with a cost of $234,000 and Product B raw materials with a cost of $157,000.
After finishing data input related to the Alternative Scenario 1, the environmental engineer
moves to the Base Scenario by clicking on the Base button at the top of the screen. 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
Haying 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 clicking on the Scenario
Summary tab button at the bottom of the screen. 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 clicking on the Altl button at the top of the screen. To make any changes to the data for
this scenario, she either clicks on the Initial Investment tab button for the Initial Investment
Costs sheet or on the Annual Operating tab button 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, she moves to the Base Scenario by
clicking on the Base button at the top of the screen. 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 clicks on the Tax
Deduction tab button at the bottom of the screen. Once inside the sheet, she moves to the
4-35
-------
P2/FINANCE Version 3.0
Case Studies
Alternative Scenario 1 section by clicking on the Altl button at the top of the screen. 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.
Incremental Cash Flow Analysis sheet
To open the Incremental Cash Flow Analysis sheet, the environmental engineer clicks on the
Cash Flow tab button at the bottom of the screen. Once inside the sheet, she moves to the
section that reflects the comparison of the Alternative Scenario 1 and the Base Scenario by
clicking on the Altl vs Base button at the top of the screen. 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 clicks on the
Profitability Analysis tab button at the bottom of the screen. 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.
4-36
-------
P2/FINANCE
Version 3.0
Title-pg1
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
-------
9/1/96
DEFAULT PARAMETERS
Analysis Name: Batch Still Solvent Recovery 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 "- >::v;3.D%|
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
tha opportunity to gain a return on another investment. Many
compantes 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 fc :,':; .; JSiOS&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/F1NANCE will calculate an
Aggregate Income Tax Rate.
Local Income Tax Rate •* » ,;;..',:.0.0%
State Income Tax Rate .". ,:?..» „:: 8;Q%
Federal Income Tax Rate isS£3233%'
Aggregate Income Tax Rate 37.9% |
|The Default Parameters; entered by the user in thfe .section can be
|i|rplied to^hs entire prcijectfile by presjsing the,buflpjl;below,. Do.|iDj
|>reis *!S bujta.rji un)6SS vou are suw that.you. want these, values to
fejptipo&na §j»p*[|3*pi9cj.filej Tjfiy^f^t"' _ |! ^
' ''v-ifl;ij!
Scenario Parameters
P2/FINANCE allows you to create two alternative financial analysis
scenarios, which represent different investment options you are
considering. You can also 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'
|Batch.Sffll Recovery System " ' , ' - , " ' 4
,' ", "i "uTft '' ,i "/"'Hlf T? " 'HUB OF j| S5™|iK!iifHli!fB 'BfPftl
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 • "' : 5.0:
To specify Depredation Method, use these abbreviations:
Straight Line SL
1 50% Declining Balance switching to Straight Line 1 .5DB
200% Declining Balance switching to Straight Line DDB or 2DB
Expensed (tax deductible in the first year) EXP
Working Capital (not tax deductible) WC
II Inv. Year|M=:r3:S^-0:l Lifetime! ,' - -,:'1Sj
Start Yearl 1| End Yearl 15|
Alternative Scenario 2
Name
I , ti.-'f'":' ,\
Inv. Year) b| Lifetime)/ ( *A5\
Start Year) 1| End Yearl 15|
Base Scenario
Name
[Off-Site Wastg Disposal andiTreatrhent „ ' *l
lnv.Year|i ;;«:,; :f;0 j Lifetime! 15]
Start Yearl 1| End Year! 15|
-------
Alternative Scenario 1:
INITIAL INVESTMENT COSTS - Alternative Scenario 1
Batch Still Recovery System 9/1/96 lnv-Alt1-pg1
Initial Investment Costs $ Amount Initial Investment Costs $ Amount
Construction {Inv. Year 6) ",1"*' ••'., C "^ ^
Dep. Method "~ ^
Dep. Period , ^
' J -r- sl Investment Year
'r315 Lifetime
Constracfton of btuWing {75%f * "^Xt^». " v
4 "• i->- > -^"" "<
I/' i" in "" " "C""^ k', J •
•,^" "" * « . "" " ** *•* J^ " ""'- ^^
"<- C" ^. ^ r** ^™"* r* -S Srt"xtl*/
t » > If-**, "^ ^*?^S f "f1~ " (
" v. „ - , - -t , "^ v YiT * i - -r
, •? t ' -^ f ^ „ w "*>^J.4?i" ~^>M5^;r-
^ *^ ^ ^^i-11 "'"'tM- ''"f-fc^^
* ^ > ^ ^ "*J^Htf ^ ^ ^™*
Salvage Value [ *
TOTAL
; «•_ ,*",.$
it, "- , -JgQ
c ft'OSSSOtf
* "<-„*'
•JS- '•* A ^-» JJ-, i
^
"> -' ' I
!'™f '
' ' ** -4
' -?>f mvj J^~
' ,«>*•>-
$1,057,500
Consftaci^^ -*—?-•-•?•--••* ^ ^ ^J^'T^*
Dep. Method ™
Dep. Period - ^~
Remammg cbnstructon
k sl Investment Year
31.5 Lifetime
ofbuikfirlg{25%)"" ** *-t;
» •*<, «f*-_ni/"'' ii i ^»«n ^-,fCs.A E-ir * "^
^ J5""8 p- fig -MJS. »i — =-f T ^ j- ,«- J/^.* **^- "^ ^fj
t^ -*" — "^ ^ n. "^ * j- "* "^.s^ ****^'-" A s1*1* ** i, f. •* -5^
*i i^j. (*" ^j, >? V«"^ hSC?, O^'iS"" -v, »
^v. " *i~_CT4f' '"'"jc'UL'"*Sf >-- "'"'/_"
-* <• > * * i" I., \- , „ / T"*"^
Salvage Value)
Purchased Equipme
Dep. Method -> •*'
Dep. Period L
' TOTAL
' % J ' 1
'V *59
. " S352;500!
'./i -•• 4, * '
KS ^ ~t ^ J-
c *** « ~' " ^f"
*'» >*".. J "f«
- •« r
$352,500
If-JnvJWar 1) " """""Sp ~~^J~ T~ f -^
ddb Investment Year
< 5.0 Lifetime
Distillation vessels, odor abatement equipment, . •• • '
1
1 ^ ' 15
,v >^S3300''
molecularsieveurttt, storage tanks,, heat exhangers •;: ,
^pipino^nafenals^^lves, instninietus,. etc. ^ ^
••* "1 \ "V !J "" -i f "*% * J, ^-4*3^
, , % ,ji^-**^ ^
„.*••.»,•!- V "-*.-•* -R-
Salvage Value! $3Q,00Or1 TOTAL
Trap JngTfn£ Ywar J
Dep. Method r
Dep. Period J ,
*s* Ji, ™^
/ i ^^ ^- »\
" ^fr s ^ja^ -i
$853,500
r™vr__:r5r^ 13I^
•9&XP Investment Year
* "0.0" Lifetime
Cost of time fo^three operators to attena: free-
on^weekon-site training session ^^ „-"
3 ^ *- ^=
» •- ( ' 1 ~'
Salvage Value) -^ ^
' r" I^_^
Dep. Method
Dep. Period / ,
tf " w.
5 -r~ ,, ?*%_,, .-„•-' ji- Ir^-ik,
^ vr T; ^j, ~ •*$ ^ ** j|jj.
TOTAL
L~«i-™ A ^4
i - * '»'~*5
,' '^250
i?<-t«**-*
.^ ,4 „ ^.
' M T ™JT
$5,250
'"iiZT^r3'"^™""^''*^™^"^"' *"-»'?£ "~7-»ir 'S'*"5"1
/. ddb Investment Year
5.0 Lifetime
T <• , "irf*1* «• -a "»*
"* j *" •>>- l ~ «s< 11f«>ViJ' if
' ' - _ ^^ ^''^iijf ^ *, >^v-
Salvage Value) -
TOTAL
1 2 rO'
"* ^ - 15T
*"f i ,^_
x
$0
Engineering and Planning (Inv. Year 0) r^< "J=rsr'' -Ct^'SI
Dep. Method ' ^" ^sl Investment Year
Dep. Period 3fv5_ Lifetime
O'dskteeBgineermg forbutidms constaS(*Lon ^S 7, el
« " ' Cf c * "" -'- Jj*v'*1 -*\ } f *!x " "^'« ^ ?»'*!•.
" " - ' "" ,A .* ^ ^ ^ H 1^41:
A*" ^ . v**_ ,- rj ""v -T^,
*"*«.-* ^^^i T ^*^.,y
* ^ s"" V ^ V"", C* 7W?
" * "" , " '« " " -^ I ^ IT
^•^*"» r%^t t Srf^ ^-r^^
Salvage Value) ,^ - ^ * TOTAL
_*• ,1"
i, ^"^f-^
sA<^g.«SF
^.^ W^x— ^ »*. ^
I* «^ ^>'",
t> J> x^ ^ 1
hi
Iff^ #,'1pi^
r. f ^r^,. ^ ""
$399.000
Inite^n^niPinnW^^eaM)^ ""^T ^7T' '
Dep. Method , sll Investment Year
Dep. Penod - 3tS-| Lifetime
In-house labor ^ . -^f
i;«=^J" ^ 'xa $ 4 JSf^E
» >• " *5 v, ^ C « ' 'l
s J » - r^ ^ -,^~
~ " -•*. ~" <. ^> „
Salvage Value ^ A TOTAL
> J l 'f
•SIBTJSQQ
*,
u- «• -»
\ "»ji, s
^ * n^-;B _x
« ~^«,
$157,500
iqufpment Installation (Inv. Year 1) ~" "^"*
Dep. Method - „ r a *" ' • t ^^f^.
Salvage ValuefJ ' TOTAL
, ^ ~* 1
^^15^
^•itTZKSSIk
A j?,*^ v'
* *,-"*!, .
> > H •• *i=
'wu^ - ;
$770,250
BI^^SKCosfe^Equ|pTO5nf^v.lfla£i^ " TTr^T"
Dep. Method : . t3db Investment Year
Dep. Period * * " 5.0 Lifetime
Rtefttee engineering ^ ,. ^*r-r«£r*l
Cortractor engineering " ^ ^, * K"\
**,4r ~ O'lf * n, 'ii, H%^'*"*tKfl
Salvage Valuef* , , • ^ TOTAL
, ^N, ^_J.
1" * jfg,
"- SS&ffiKKk
^ $^2;5QO,
r^ r_ 4 ^ s.
Y* ^
$480,000
*• ^ A pXf-x " £ "* ™~- ^' ^ ' * '' K^ ^ jM" "** "H ^ ^' i f ^?4
4''H1 "> 7 *T jrf "!? ^ "* L '"s ^ ^ n^*1 sl^y-Ba. r F *^<- "^
Dep. Method -. *- - tTL" a» *'
Salvage Value! ^ TOTAL
rsȣ
-------
Dep. Method
Dcp. Period
i
Salvage Value |
T-.-.-J^^ „„,..„,,„„, ..„„,.. -unpiilW'iilliirfU
Dep. Method
Dep, Period
Salvage Value
- , ,»,^^T_ ^^^rrr
ddb Investment Year
510- Lifetime
^ $
. T * •*'*"
,fnf, | * jj I Jgi
if H. 'km. n r
TOTAL
cfdb Investment Year
5.QT Lifetime
f
,
• 1 . "v
TOTAL
r
0
, " "° t5
W4A.
$0
rf» .tjur jf™*
0
15
•»"
$0
|
i>
Dep. Method
Dep. Period
s
-r rf
~ \ f
, "Su^
#• I
Salvage Value | '
i V ^
Dep. Method
Dep. Period
_
t.
„ *
s^
Salvage Value |
;» r^y.^x'T
,iddb Investment Year
5,0 Lifetime
' I'r"*!8*. i^&lW.
* t •'fifr'V/ JV^*1''
^•o^ ^S'if-*1 ^« ^
, W r " i'%^*^i
i - rC ? ^>^
TOTAL
« „ ^ °1-f H F'I,VT#-
« ddb Investment Year
5,0 Lifetime
1 1 > f , 1 rtjf 1»w *• 4
| •• t«l, )« 4 f ^"^ M
, s * « *v '* <4x<^<
f4 Hj,** |> <'<>r?l^
TOTAL
lnv-Alt1-pg2
1 0
" sf^lS
d t" ^ ^ H^
* fi „
i»I 1*
V t,"*! 'r
!r v^'
$0
f^-v^yr »j . „
' <• t, 10
l^S1
4W ' - *• f ""
^,^r ' /"
*•
*•
$0
-------
1 INITIAL INVESTMENT COSTS - Base Scenario
Base Scenario: Off-Site Waste Disposal and Treatment 9/1/96 lnv-Base-pg1
Initial Investment Costs $ Amount Initial Investment Costs
Construction (Inv. Year 0)
Dep. Method - i «.
Dep Penod *>
i? ddb Investment Year
5~6 Lifetime
NcKxrastacfton "„ ~~TI° t* "" " *"**% =~ *'" .^
" * < ' v ""U v/j-ili* *fj» *_ w*,*^
^ -9S,/ %> -*•»'•*'" - Ir^^t ^^F^I*^!
-»-"» -i»- , | ^.^ ^J-v ^JXi> r_f^
""" i* £ """L. '"*" * *VTI« *« ii
~fti-» -»> -' N.V ^-»^"i^ ' Tftt^ t^si^
„ i "t - "X^~* ~^"~l ,,su "%-s x.-^,/ ! i*«
"^ > "* v ,-
, "1' ^-^x ^^" "x-^
* »* 1 t~ .r- "• -*• f *i
Salvage Value)
" * * i; TOTAL
- -' J).
;"" "^ i-W
"Y J ^ * 150 .
' ^ *> ^ -^" ^"^ ^
^i * f ':
.^•r "*> '
:"' wi, ""
;% J „ ^tr«.
" P- * v-/ '-f
" > j'l
?*-^.
$0
Construction (Inv. Year 1)
Dep Method x ,* **••
Dep Period JT 1"
/» 'idb Investment Year
^ "570 Lifetime
No construction ! **„ t" *» ^ ^ " "
"'' - ' -""i^ £ ** «^ "* ,s •> '-i -Si,
* •«.£ -. *4-r'*f ,> ^ » iT^ J!,
^1 •* T^n«^^ i^** ' "* >• f J
Salvage Value),'"
^ " TOTAL
"-- ^ , 0"
• j--5 m
"~ "S Tj$0
™ "* «r i.-. e
, •>" > ^
««. ~
^ ^ ^ "
^ ^, ^^^
so
Purchased Equipment (Inv. Year 1)
Dep. Method
Dep Period 3? „-
d3b Investment Year
*• 5,0 , Lifetime
No'purchasitf sqtHp&jent ^ / /"> , r 1 _i
„*" *-• ~-J*^^<;'-" »V^»^ ';
^ ,~ !„ -v* -> J ***» ^ - /*- **
*~-£ £ f *f ^^ ~*^ ' ,'^s*'""-'-^"H:r*^%- *"*"
- ,* , ~ j ^»-«*-c< ' " «•» .•>l-^,'>i^iC. 0
r> » SIS"
""a^f^j^ ^^ 1$0
' i*. • ' ' r
•^j-
^ *•*""*>
r ^-B.-'
$0
$ Amount
Engineering and Planning (Inv. Year 0)
Dep. Method
Dep. Period
< ~~ "r ddb
5,0
Investment Year
Lifetime
^eisSpifingorpjamtog^ " "S >"£y^
15* ^V t i"™ ^ c- !" , . _T^jrvl'*V
u. .C ^~ ? e-
^ „ , T^
^Ac1' .' '^J^'
|,*V"»,'^,, , <; t x\t- '«T^ _ L. ^ r
Salvage Value
Engineering i
Dep. Method
Dep. Period
L - ' "
TOTAL
. «-_ "CjQj
s» Tvlf:
>' i %«®P
*••• .^,--r1 t r;
lir>*l * jU""
" i *" p-"» -'
-rT"r "•*£ t-
J__ >vj ,,,,'"
$0
3hd Planning (Inv. Year 1)
* - .ddb
' '_ 50
Mo snglneefJns or olarmJno: „,
t. - i
f v j.
Investment Year
Lifetime
'ij1 *- „ <
* % X f *^,
-^ ^f "^ " * A : **^j
"'.",- % » ^~
«t_ ^- s K' ^ ^
-•-^ _ _
~ A
Salvage Value |
-- „ r , jlJj ^
TOTAL
," -- 0
' "„ fS
*~ $0
>
t I
« ^ „_. ^
$0
Equipment Installation (Inv. Year 1)
Dep. Method
Dep. Period
ddb
: -50
Investment Year
Lifetime
NbeqalpmeBtiHsfalJaflon1- I ' ^ ~* ^,
.
1 « " ;i:!
->riK ""_ • ^ •* i ~ «,
" ^ r" ,- , ^t-,r <-*,<_•* ^ * ^_s
r ^ . •*
~
Salvage Valued " >, , - <*
Training (Inv. Year 1)
Dep. Method
Dep. Period
No training .*
fc
*" ^ ir ^**
Salvage Value) :
Dep. Method
Dep. Period "•
- «v ddb Investment Year
_ ~S.O Lifetime
-T* "" r K-* " ;^J ,
,':* * yC'^'**' 1^
;-' '„ -r j « - -J^
V TOTAL
' » IN. -_0
> •<- „ 16
<,„ % ** Sft"
r "J '
i •-•— ^
SO
r^ddb Investment Year
~ 5:0 Lifetime
t \ "< t *^ '* r *^jj %- "^-^ 7*'?"** i
* t n f 3 •>• ' "•< »«";i', '-, rjTT^"*
~ " ">_ ^r » ? J I, i -~ » '
Salvage Value):; ,
TOTAL
' ~~.'i£f _ '*0
: •* tf I 4 15
» »«,' - ^
: ^ * "„ * « "*"
N l«. '
$0
f > « *- i c
TOTAL
Engineering Costs - Equipment (Inv. Year 1)
Dep. Method
Dep. Period
f. ddb
- 50
No engineering -equipment
~c " ~~
^ T
Salvage Value | , ;
Dep. Method
Dep. Period
-ddb
50
t "'\ '," »•!'-" ^ >
Investment Year
Lifetime
» '/<£«- *
. ," U -I-. 1
TOTAL
Investment Year
Lifetime
j « . » *-^f
•*•*-,""', •. * / J,
P , '£/^ f ' » ^ ^ ' j~ , "
Salvage Value
*
TOTAL
*, „ f ^4
^Q,
4r-
f ^ ^""^ °
*
J
$0
^Jtft t5"
' ~<~ l"\-
if- -^
r^—
$0
','1. 0
'
" ^ N<1' '-*X-
- YJ^, ^ j-^>
•x, ^ j " *-
$0
-------
1
Dep. Method
Dep. Period
j : .. •
1!
Salvage Value)
Dep. Method
Dep. Period
' , ' . .:
'" " '" ,1!"' '' '1
Salvage Value |
ddb Investment Year
5JO Lifetime
„ r '," rfl'«
. ' L- ' *
< • 1 | IT t 1 " 1
',_ " ' r
* , .' , V -,
TOTAL
ddb Investment Year
5JJ Lifetime
',:.• '..' : . ' ; '.• ;' t i'.'.'13;5fi,'|r<.itj|.
.••• t^ir^rA^t^Arnto^lifirk
Jl "', \ ';_.': ^"^'"'iV ! "I'J'^'J^lJK'.J'^^.i'
-. 7- ! , y j-ii .. f
TOTAL
0
15
r ' * .
f k
u. >
$0
:"J-=:.-,;=S'."*:Q'
•,.::-.:.:"-::,''Ji5"
'- ' ".:-i-^fv.
..-:.Vi"L'V ;"'.-,'.:.' «_i.'
.•'' '••!• -•' - :'.
$0
Dep. Method
Dep. Period
f ! t
,*• i
^,A
-
Salvage Value |
Dep. Method
Dep. Period
t- rt+
f
•i-. -
Salvage Value (;;
MdEI Investment Year
5,0 Lifetime
a S
,j TOTAL
ddb Investment Year
5.0, Lifetime
"4- -«>»'?
^ ""*>!
1 i <* r1
t
TOTAL
lnv-Base-pg2
"r < O.1
"Ji 4&
tr ^
If »* 4
> , <> •
, I1" ', , *•
««,,. . '
1 T.J
$0
* , * - to~
*"" * v r^tC1
f, ^ T-*5/J-
J J » ^ *
1 •"? f "
3-V ^
=5* i- >
$0
-------
ANNUAL OPERATING COSTS - Alternative Scenario 1
Alternative Scenario 1: Batch Still Recovery System 9/1/96
Op-Alt1-pg1
Annual Operating Costs
$ Amount Annual Operating Costs
$ Amount
[Virgin Raw Materials (Start Year 1)
Escalation Ratej " 0Q3£| Start Year
End Year
Product A rawlaatenals *-••> ^ !«r „" '*
P"roauctB tavr materials ^ * , * - v « „$
^,, t^-r- — ^ ^ C^^-t^.. *~ j
>r " „ * t , **•""- •_£&£ ** ~
' ~ „" *»-?" "i ;f 5V " jr"^
- ^ ' "" •• ^ l's4f - - _ *
-* r ^ •&_ ^ ) v ^*- ^ """" 5S*"^
„„ ^~, * •*-*•*• j- *•" «£J^ k*^^
^ ^t^jn ^ t& V-^K *!„ ^ ^^X. ^ ^
TOTAL
-«,"f
^"^ ~" L. ~t
- • $23a.,oia
^ ^J57>00&
»t-~%fH!*T
1""tJ A^~ ^. '
^ 1 ^" 1
» 1 U^_
* ~L«I f
I-J^1 ^ •*<&&
^•-^Lf J"
$391,000
[Manifesting Labor (StarCYear 1J
^**
Escalation Rate[]^
0.«%i Start Year
End Year
tn-hoase preparaftortfor shipment of-wastS ProdoctA'
In-house preparation for sriiprnent of waste Pjociuct B
= * I* f ,_ ^Ci, # J3~iTfJ-*» (sW,
j . V " * ^ * 'f ' 4JZ4 # !•- f fe.
». ' ^ "" " ^ „ <, -f«» J V - t t~ "^ v
•w* ' ~ w' » - ^^'t," ™ * ' *"
TOTAL
" ^ ,1 1-
" -if i- ^1
' ^$9S8
^ _ $2?2SO,
«-C* % t*
f ,.,!«„ ""!*r
X",*w ^-3T *
» ^ "", ;&
$3,168
[Virgin RawMaterials (Start Year 2)
Escalation Rate \. f>,0%1
Start Year
End Year
ProdiictA raw materials f - — _ - ^^ ~ * •-
Product B raw materials « ' * ri ,*-"-, ^ t-J%r
ProductX raw mMerals "» * « i~>_iii2L i *'
*"v ' "C -r "S,"»-*T V^.,-1*-^ t' i:
" . « i •« , ^ ^» r fi-l7 '"* *"T ."if ' *
TOTAL
•C. -1, !" fcjg
"* »-"* - 2
-"-'^ssjaoB
* ^ ""^3,500"
T £*$4t£DO£L
^J ~ feiTL >• "*
T^"WJ. •>
$472,600
. «j - -JSP,
Escalation Rate^ \ ^0%l
Start Year
End Year
Iri-house prepflr^ion Jor slapirieRlQil^rQdaciX _ '
TOTAL
•ear2)
Escalation Rate(
~ 00%|
Start Year
End Year
1.5 operators to ran the batch sfllK — --„ „« ^ %
k * r „ IT^ i ^•>^.^ ^^ ^_ •#£•£}*
'l S **, , ^ *,- ^ "**8 * tf ^< " _ ~N »-•«•'_
TOTAL
^ ^- *s~
« * t
** ~i™" i "* 35
^^^S^ODfA
3^ii^ * /-'f^
• **** " ff *"*** -^~
$95,000
r Disposal (Start Year 2) -^ <
Escalation Rate|_
-Z0%|
Start Year
End Year
Product A off-sife disposal
PtedtoctXolf^itelliiposal
** * •f
-F
TOTAL
rear2)
Escalation
Rate I ,
"' 0Q%1
Start Year
End Year
Steaco; efeefacity, and nrtrogen*gas * "* ^f^^
«•«•-« "" ^ ~ „ * " » r ' "™rtk I-W1 " J1>7fi_
„- ^1^ * - *, "\-f ~ff™" y ,
- s > v* » x, » ^ y >a5-Hsr
TOTAL
•* * sj> >\ 2.
J. _!'sl,~ ^5:
^ISjOOOV
i. ,, iii-" f4*,"j
**°"jj tJ"''
* fe ^ -f^t
$15,000
[Recycling Perrnif Renewal (Start Year 2)
Escalation Rate |
0.0%|
Start Year
End Year
Two daysvotwoik/yelirio-renewpermlt fs" T ^ F ""
- " ''"" , '"**ZJ " *f P~V '. » ^
" 'r"^. "" * ~~ ^ «, J1-! f*-^^ A* -iMi
TOTAL
- ~"!*"*7i{2
; -L-^SjiT^J^S
' i -./iJSSO,
' V _ -T>^A-f<-
*" <^?™^'f;
$880
-------
[Maintenance :of Vendor Relationships (Start Year 2)
Escalation Rate! 0.0% | Start Year
End Year
Reduced total cost , •
.'' " ' -. — t ^
,
- ' ,»'"*>,
•• ; , •;•.•• i ,
TOTAL
(other ~"
Escalation Ratal 0.0%| Start Year
End Year
1 »• *
' ' .'" .'!• ' ' 1
, ,', • T '.
'-"..'.-' »* ' t'";
TOTAL
2
* 15
$2,000
* -w.
1
«i *
**
$2,000
— : — .- --
'1
7 15
"
p-
$0
Op-Alt1-pg2
VirginRaw Materials (Start Year 3) "\, 77^ rl«
Escalation Rate I 0 0% | start Year
End Year
Product A raw materials .
$120,700
V**-I Hfri
1
15
* / ?4'
^
'} i* *5t
*• ^
$0
-------
•Base Scenario: Off-Site Waste Disposal and Treatment 9/1/96 Op Base Da1
I Virgin Raw Materials (Start Yearl) . I Vendor Disposal (Start Year 1)
Escalation Rate| >"i $s0%| Start Year
End Year
Product Aiaferftaterfafe j ^ iP
ProlJaclBlavtfiWiterjafe _,- J"1"- <•" „' •?"*
_ •< »* •* 'Tt . ~j. t^'r''!',^ic?wtS>S^ «*
*•'%,- I- ^\ i ' r C^j£lf*^S%
f " t» '~, T,** n**!6i1f' "?|B§ "S^KX".!
' * T "" ** « '* v ^ fr «V,*" ' •$• %vrv^%*
k %" £l7ss£M~ ** YH dr r *> ? *" i % /it
j **•*<••£ ** """S*^* -_• ?,T ^* .2,1*;
: - ^^ .J*"* -„,, « £ rv-fc.ii - ' ufv.!**
TOTAL
| Manifesting Labor (Start Year 1)
^!>£%z§%^o
^\ ^f^l^^^^OQ
w- 1 J*
c^'iH^ i_/*
^ ^^ i.« ^, V
"* * - » <=v
i T > - "-'"
*"" 'B™St- ™.!
$391,000
Escalation Rate | i ^ ^O.Q%j Start Year
End Year
la-hpusfe pieparaftofilorslaproeatof tfasiSBPOdoet A,
TOTAL
(Virgin Raw Materials (Start Year 2)
Escalation Rate Start Year
End Year
*•_ f 7 f ^s
-^ 'i'jT^t
| £,,
TOTAL
(Manifesting Labor (Start Year 2)
Escalation Rate | OQSSj Start Year
End Year
-v 1 * %.-f .
TOTAL
-4i» "^'fe 4
:" ,7- MS
$3,168
r — - 5^; — -
™ f ^" ^, ^ir? *fjr,
^ ™ ,V rl^?
$414,000
Escalation Rate I" , ^2,0%) Start Year
End Year
Product A oi¥-:Stte disposal <» r »«* ^
Rroduct )S off-site disposal *• *• « » -** "^
J'*^°2iv A," 3- -t ''<•»- "» ^^"Ifc i-^'V
;" SI""1- ^« "J~- , ^~kMs-f ^"i*"^"*1
'"*E_"^. ^vf^T^ ^*" "^**% ""'***
f-*4- x™ - " ' ' ^ '*' ^ 1 "* *• * "i* * ^^ _JT'
' '^^ "^ J*8' ^1 r !- r ^*
' ""^"i,^,* _» j ~"^ * "* , ^^
TOTAL
Maintenance of Vendor Relationships (Start Ye
1 ~^J^.
-^i *^v ^i •*, iw5
~"^J«)4^ob""
_, fjgffiMf
• ^ ^ia^ #• ".
^ *»"«•
v , »-r-
1- V
vv ' -=*- '
^ "S. „' TL
« «
$387,000
•arD
escalation Rate | ™'0.e%| Start Year
End Year
In-house Jabot " _* ^ N ^ c ^ '"
ww«^-^i^i "- i "_ - - •*- *
TOTAL
Vendor Disposal (Start Year 2)
escalation Kale | ^_ vi.o%| Start Year
End Year
TOTAL
I Utilities (Start Year 2)
7^' T- r^
^«««
$3,500
(Direct Labor (Start Year 2)
Escalation Rate| ~ "^0,0%"] Start Year
End Year
NooperaforetorroMtcWsfilf - -&•>?„.
TOTAL
'„? "2
~*! . , w 45
i' _ ^&
$0
^=^^^=^^=^^=:
I
Escalation Ratel l Oft%| Start Year
End Year
KpJjatehsMiequmnfl extra utilities, ' Jc»
TOTAL
Recycling Permit Renewal (Start Year 2)
Escalation Rate |_ 0-0%| Start Year
End Year
No raeyclng permit " - t " -* ^
< *£ • - s. 3_ ^ r
TOTAL
"* t
ts
t t $2:000
$6,400
$862,000
$862,000
__ ._
• rig
^ A ^
$0
^ '*"*" „. 15
$0
-------
1
Maintenance of Vendor Relationships (Start Ye
Escalation Ratel .Q.0%1 Start Year
End Year
Cost .increase associated j^ProductX^ZrZ"!:"""
; ' . l ''is's1'
, , •_,, , „,,-•, -r'wg^
«»-»•.. * i «i u rfr Vn. wftr 'zfjjjf
IP ^ *, if*t "j* J'Tft1'!""
TOTAL
Other
Eicalation Ratel 0.0%| Start Year
End Year
, . _ . . -^',, ,:,, ., .rJT.-_,.^;.jjyi
, ... " • ' .'•-,', '":..- ;:.:/,.. ^.i'-^e-IiijsiflfiKirtKfStSiJ
. ' .: . ".:.'. ',;... '.:•' "."?!>;.:.. 'L^JiXifiiEKJ
•. '-:, . !••'•:; i-^^^-aS'Stiisasfis*
TOTAL
ar2)
:,:;.;.\::.:-Z'.J^
"i"™1-- ,-"f "L;CiJii;?'l'linf5
5V.:-"iaaaiQa:;
K&.^/fSfei
jj»-';i?K*if*i>;;!
;:t.J?;:2c^;?;.;;s
,'.i° L^t.* ^'/i'lkiL.^-!-'''^ ,
$4,000
'.rr:i;3'3:'-:-l
•;::.;.;". ..r-i'^as
'r.,:. .'.'•' "SX.ryj::'./)
'"''' '/"•'" -•.•='-•; -'-J.
'/., .'"'[J UJiilflli.v,,;: ij.*I""^'.i
iw. , .".v'-ij.l.'iii"'^!,"1"" I'lT.-:
$0
1
Virgin Raw Materials (Start Year 3)
Escalation Ratel 0.0% | Start Year
End Year
No .new or different raw materials costs ; '"
i iwk, \^T^AafeIr
1 "- * '* "f~
; ' - vry-^eM
' .. '< t <,- ~-!?- S™1/V
TOTAL
Other
Escalation Rate | ' O0%l Start Year
End Year
„ r . 1 .* ^\JW»tf^|*'
^ s ^
S *.
5 # Ci *•?
TOTAL
Op-Base-pg2
\ ^ f'Z
»*f" ^5
. ,^$Q
t'^ 7,,11"'^'*
T' , "1r^
" J
$0
,1
J > '
- "V^^.
A J!j,
,
"^ "" •"''•i, -
$0
-------
SCENARIO SUMMARY - Alternative Scenario 1
Alternative Scenario 1 : Batch Still Recovery System 9/1/96
INITIAL INVESTMENT COSTS
Construction (Inv. Year o)
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)
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)
Other
Other
GLOBAL PARAMETERS
Project Title: 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-Alt1-pg1
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 SUMMARY -
Base Scenario: Off-Site Waste Disposal and Treatm 9/1/96
Base Scenario
Salvage
INITIAL INVESTMENT COSTS
Construction (Inv. Year o)
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)
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)
Other
Other
GLOBAL PARAMETERS
Project Title: 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 Value
$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
0
0
0
0
0
0
0
0
0
Summ-Base-pg1
Depreciation
Inv. Year Lifetime Period
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
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Method
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
Start Year End Year Escalation
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
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%
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
Workina Capital Initial InvestmentCosts
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 o) (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
9/1/96
0 1
1,456,500 2,692,163
0 5,408
0 0
1,456,500 2,697,570
16,786
1,057,500 1,040,714
6,333
399,000 392,667
0
0 363,075
0
0 162,225
0
0 879,105
0
0 793,358
0
0 5,408
0
0 494,400
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
0
0 0
23,119
0
0
23,119
a
Tax-AIH-pgl
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
11,526
345,786
5,150
154,500
281,314
421,970
253,874
380,812
0
0
158,208
237,312
0
0
0
0
0
0
0
0
0
0
0
0
766,310
0
0
756,310
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
11,526
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
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
-------
TAX DEDUCTION SCHEDULE
Alternative Scenario 1
Alternative Scenario 1: Batch Stilt Recovery System
Operating V«ar
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Working Capital Initial InvestmentCosts
Total Initial InvestmentCosts
For each category, the top Nnt indicates the tax
deduction taken in that year, including expensed Kerns
and depredation, The bottom line tracks the Initial
Investment Cost* for all categories, plus th« Remaining
Book Value for depreciable categories.
Construction (Inv. Year o) (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) (DOB)
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)
IrtHial Investment Cost and Remaining Book Value
Engineering Costs - Equipment (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
(DDB)
MUal Investment Cost and Remaining Book Value
(DOB)
Initial Investment Cost and Remaining Book Value
{DDB)
MUal Investment Cost and Remaining Book Value
(DOB)
MUal 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-pg2
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
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
o.
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 Scenario
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 o) (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 (tnv. 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
9/1/96
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Tax-Base-pgl
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
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
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
-------
TAX DEDUCTION SCHEDULE
Base Scenario
Bssa Scenario' Off-Site Waste Disposal and Treatment
OoeratiiKi Year
Deofadabte 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 Kerns
and depredation, The bottom lina tracks the Initial
Investment Costs for all categories, plus the Remaining
Book Vsfue for depreciable categories.
Construction (Inv. Yearo) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. YearO) (DDB)
Initial Investment Cost and Remaining Book Value
Construction (Inv. Year 1) (DDB)
Initial Investment Cost and Remaining Book Value
Engineering and Planning (Inv. Yearl) (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
(DOB)
Initial Investment Cost and Remaining Book Value
(DDB)
Initial Investment Cost and Remaining Book Value
(DOB)
Initial Investment Cost and Remaining Book Value
(DOB)
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 Salvaged Equipment
Total Tax Deductions
Tax-Base-pg2
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
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
b
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 o)
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
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)
Other
Other
Total Annual Operating (CostsJ/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 (CostsJ/Savings
- Income Tax
- Initial Investment Costs
+ Recovery of Working Capital
+ Salvage Value
After-Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
9/1/96
0
1,057,500
399,000
0
0
0
0
0
0
0
0
0
0
0
0
1,456,500
1,456,500
(1,456,500)
(1,456,500)
(1.456.500)
Cash Flow-Alt!
1
0
0
363,075
162,225
879,105
793,358
5,408
494,400
0
0
0
0
0
0
2,697,570
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)
(2.278.651)
2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
414,812
426,668
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
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
4
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
n
v. Base-pg.1
7
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
187,726
0
0
2,028,493
768,799
2,216,218
768,799
0
0
0
1,447,420
4,033,109
454381
-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Analysis Name; Batch StiH Solvent Recovery
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Construction (Inv, Year o)
Engineering and Planning (Inv. Year 0)
CoottructSon (Iw Year 1)
Engineering and Planning (Inv. Year 1)
Purchased Equipment (Inv. Year 1)
Equipment Installation (Inv. Year 1)
Training On*. Year 1}
Engineering Cotti - Equipment (Inv. Year 1)
Toui initial Investment Costs
INCREMENTAL ANNUAL OPERATINC5 (COSTSJ/SAVINGS
Vwjin Raw Materials (Start Year 1)
Vendor Diipotal (Start Year 1)
Manifesting Labor (Start Year 1)
Maintenance of Vendor Relationships (Start Year 1)
Vtrgtn Raw Malarial! (Start Year 2)
Vendor Disposal (Start Year 2)
Manifesting Labor (Start Year 2)
Utilftitt (Start Yew 2)
Direct Labor (Start Year 2)
Recycling PermH Renewal (Start Year 2)
Maintenance of Vendor Relationships (Start Year 2)
VYfiin Raw Materials (Start Year 3)
Other
Other
foul Annual Operating (Costsysavlngs
INCREMENTAL TAX CALCULATION
Annual Operating (Costsysavings
- Depreciation
• Expensed Initial Investment Costs
+Taxab'e Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 37.9%
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (CostsySavings
-Income Tax
* Initial Investment Costs
•t Recovery of Working Capital
+ Salvage Value
After-Tax Cash Flow
Cumulative Cash Flow
Diicounttd Cash Flow
Cash Flow-Aid v. Base-pg.2
8
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
2,312,582
852,624
0
0
0
1,459,958
5,493,067
388.404
9
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
2,350,416
890,808
2,413,330
890,808
0
0
0
1,522,522
7,015,590
343.262
10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
11
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
26^,193
12
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
557,473
694,996
4,517
9,125
590,265
1,211,574
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
11,987,733
237,097
13
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
14
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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
15
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
Analysis Name: Batch Still Solvent Recovery 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 [7:?^,;:;: M:;1|2?|
This analysis calculates the incremental profitability of each Alternative Scenario relative to the Base Scenario.
Base Scenario: 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)
#N/A
1,259,156
#N/A
2,323,351
#N/A
1,764,445
#N/A
Internal Rate of Return (%)
Scenario Name
Years 0-5 Years 0-10 Years 0-15 Years 0-12
Alternative Scenario 1 Batch Still Recovery System 8.8% 26.2%
Alternative Scenario 2 #N/A #N/A
29.3%
#N/A
27.9%
#N/A
Discounted Payback (years)
Scenario
Name
Payback
Alternative Scenario 1 Batch Still Recovery System 6.51
Alternative Scenario 2 #N/A
-------
-------
-------
-------
Appendix A:
Copy of the Blank Spreadsheet
-------
-------
P2/F1NANCE
Version 3.0
Title-pg1
PROJECT TITLE:
PREPARED BY:
ORGANIZATION:
COMMENTS:
r s'%> TV '*••> ^"v-
* * 'L sfsaf
A"?" 4*"^^
Hrt^<' ft'-' ^-<^V
."VJ- i ^ •>*;,- ' •* '** "
•f. ' ^tSS _ i?-^.**- j>~ - J* t
^ - »-S*4» 5^"j "*^ *« c, t '
'-, «•>»7, _J*»,i „«< *r „« ' ™Tf
-. *f4j_
•r^^- *v
^^ " V^""1 S-J^TT
'^CJ
A" r
• "f if "*"*
^Sf ^
, , t ,f I » „ ^V? .
if f,
* ~r
:•"*". *\, , -/
J.?
>-<••" ^^,>^%
,v -«g- *
_*• j ^ -f
^* f!
y^ ^)
i, ^ VJL.
*^ „
S *»,'_•"» H,-6 ™A. «£i^j f
P2/FINANCE
Pollution Prevention Financial Analysis
and Cost Evaluation System
Version 3.0
Copyright 1996
Tellus Institute
Boston, MA
-------
9/1/93
DEFAULT PARAMETERS
Analysis Name: Blank Spreadsheet 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' . - :3S%\
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, see the on-line help.
Discount Rate a;_i^32JQ%|
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 *"•; .,„.; ;J5.0%
State Income Tax Rate : • -l~~j $5.7%
Federal Income Tax Rate . ,:. " ~26i7%
Aggregate Income Tax Rate 41 .9% I
The Default Parameteis entered by the user in this section, can bej
applied to the entire project file by pressing the button below. Donoi]
brass this button unless you are sure that you ~want thesa values to
aonlv to " "' • ' • 5".Q '
To specify Depredation Method, use these abbreviations:
Straight Line SL
150% Declining Balance switching to Straight Line 1 .5DB
200% Declining Balance switching to Straight Line DDB or 2DB
Expensed (tax deductible in the first year) EXP
Working Capital (not tax deductible) WC
Start Year) 1| End Yeiarl 15|
Alternative Scenario 2
Name
(Alternative Scenario 2 Name , • |
Inv.Yearf 0| Lifetimel 15 \
Start Yearl 1| EndYeSrl 15|
Base Scenario
Name
IBase Scerian"b«Narnei , ', - \
Inv. Yearl ; 0 I Lifetime U, , , ,151
Start Yearl 1| EndYear| 15|
-------
INITIAL INVESTMENT COSTS - Alternative Scenario 1
Alternative Scenario 1: Alternative Scenario 1 Name 9/1/96 lnv-Altl-pg1
Initial Investment Costs
$ Amount Initial Investment Costs
Purchased Equipment (Purchase, Tax, Deliveri
Dep. Method
Dep. Period
ddB
^ 53(
Process Equipment ,«,
Investment Year
Lifetime
•* " A.^ "«""^
Storage and Materials Haridnng Equipment '
Safety/Protective Equ'ipraent ~ ~~ " _*r*~ ' i>c,~^,~*-% v •--
, V * * A* v J „, "^ -L "„«: ^,
»' ' "* 0., v -• •< %-$ rt -^Vii ^S
SpareParis ~ '-
Salvage Value
Planning/Eng
Dep. Method
Dep. Period
!
ineering (iali
> ,
TOTAL
orrMaterials) , ~" „
Investment Year
Lifetime
In-house Planning " j ,._"'*
In-houseEnofteenngTDesfgn ^ "U, ju* *
Procurement „_, /"_•( ,« , ^'-^~£*.J-
Vendor/ConftactccFees, ?* *
-, ^' >• w. - «•-
"- ~ « -r~-?t ,^
•< ' '* -*~t >«1#l« r ^ -•
Salvage Value) " „ "•„
TOTAL
> ^?V -" t
^ !0
-"* JES1"
is™, -5 T^
•s" "*si^r s i '
rj* JT ^, *
M. *
Wv. "" JJ
! -",_, -^"V p~
-»i "^*~ »
$0
J
r >. * -cs o
-J. " a~t5L
^ *> >-. ^ j_
jEi'JaS. ^^TA.
.J X l fl ' i
«J'-_-' ' ,
r'S •»"4.:
^ , ,.
$0
Construction/lnstaliatipn (Labor Materials) r<_ '•.»,.;"
Dep. Method
Dep. Period
~ -ddb
t_ 5JO-
Investment Year
Lifetime
In-house """ * 1^' ^ ~i6x^i_*" >;
Equipment Rental < ^ _*_h -,".' -»"•
"**" t "" ",r tT ^~ ' * '^"""'' Z1 r'F'<
" -, ' "-? ^ * it.' *i?«
Salvage Value! * • ~ "•% z
Permitting
Dep. Method
Dep. Period
1
- * ddb
£0/
TOTAL
Investment Year
Lifetime
In-house „ ", x 17*~ "»-
Permittees r * " ' "^ x»
Vendor/CoHteadoQEees.,.,,r!i ~/^ ^^_ *•
1 n ~'? 1>£1 ^ «-~ 7 '
Salvage Value
Working Capi
Dep. Method
Dep. Period
~
^ fc.
tal
' ddb
•'50.
TOTAL
' -"— •, s r>.
,-^ <*"t&.
' ^^~ *"*
i,-"*' ~ j,* v?
a toK~"L._*. 1*"'
~ l \ ' "-* ,
- """ * w. * _."
$0
,:T5^\T
: -^ - l{)
r-< / 5 45
_^ ,
f "l1 ^ ,
» 1 •"")
•s s^
$0
X ^ ^ " ^ -1 ^
Investment Year
Lifetime
-- T '- - ,-f •> '-* ,. » 'jr.
5 #*^ ^^^^^^T"^;* /*~^
' 1 *„"" ^ 'C*^'* ™
Salvage Value
;
TOTAL
/i>K ' ,™0i
."* «_•* 15»
r
"" 1 _ *
'V'RJI!. '
$0
$ Amount
Utility Connections/Systems " ^ ^T ^"'-'""^T
Dep. Method
Dep. Period
Electricity "
Siearft' '
Water ,
ddb
5.0
, *'
~ «.
i
Investment Year
Lifetime
"-_•".- ^|.
''»•>-« tJ-' -t,1 '
^ j - ' r* *A v ^Jf
Fael 4, •'.'"'' ^ _ "~ -• ~ " <*- T~
Ptefif Afr " ' - , >V: »
JneitGas ^ x , \ "- _ ^ >L ^
SteftigeratKjn * s ' >
Sewerage v * i . ;- if [ *
Gerieral^'lunibfrig . - *-*",*'
Salvage Value
siePreparat
Dep. Method
Dep.- Period
InJjousi*,
^ 0^
TOTAL
"^ " ~JT0
*• j • 1*?
/ .. * 4rO
•Xf"5" ^
*, ,"^
-" ''J\ , ^
*--> r — t ",
*~ "
' ^j- ^ p
; } ^;<-
^"i
i ' .. 1
$0
on (Labor Materials) .*! """""""""3 , ~ ~ ** "
mm
ao
Investment Year
Lifetime
~ ^ *'*'-'-
Demoirtion & Cleanng
Old'Equfprneht/Rubbish Disposal •• ""
Grading/Landscaping
/^.
Equrproe^fRenlal * * ^
Vendos«3on&aofor Fees ~
Salvage Value
Start-upfFra^
Dep. Method
Dep. Period
In-hoase^
Trials/Manufact
*
TOTAL
ing (Labor, Materials) " „ V
- ~ " / -^.f *
taring Variances
Process/Equipment Trainina" '" " " -«x.-g*^.
SafetyTEnvironmental Training *»«, s ~v :
Vendor/Contractor Fees „ ~ _^ ~ ^-^
Salvage Value
Buildings &L
Dep Method
Dep. Period
^, __
,*
and ~
' ' "" - ddb
5S
TOTAL
Investment Year
Lifetime
. -* t * ( i
'- " i < ~1- •** 5W"
-• * ~ >• v ' » r^
- ••* • • "^ *- _"'•**• ^H,-?, *
Salvage Value
Contingency
Dep. Method
Dep. Period
.^ ^ *
11 ft
ddb
5,0
- * " " -^ i \
•T 4 s »"-*['
1
*
$0
•" -T^3
' «i "0"
"*"i5;
' vc " •* y*
~*il X. K. ^*
' " * •"• *
$0
-* " ^ * "'* -- '*^~\
Investment Year
Lifetime
i ' j. T.I
,-•••• ' -• -; ">«
*- -^ X N ^ ^ (j
Salvage Value
» , <• •
TOTAL
" ^w 0
"" . JtS
"~ *". J,
"% '^
"'•'
$0
-------
Othor
Deix Method
Dep. Period .
• • - ;'.
, : .
"' "' ,,, i! ":" "j"',,, In,,:'1 °" '' J':: "n,1,,,1^
Salvage Value) , ,
Other
Dep. Method • ' ' , .
Dep. Period
., • , ::.• A:?';;:*:: '•:
. , ":,:,< ":: ••- ?
!l • ;<>
• • • '
Salvage Value)
ddfa Investment Year
5.0 Lifetime
„ :.,,^:>:^hKrSKftS»> I W
; •*'jsi'r\,^W;.,a(i;wvsa5syjK NU
.: :•"•"-., -;*>-« igliJf'SSg*.! ' '
"' 1' * '. f\f -JPIIIri,!-' ":illf4!,!!,,il
- ' .,J . , -H^.I.JV
TOTAL
!* f 1 «
Q
~r "15
•i t
u.
(
$0
!'"'"' ""0
15
H
WWr '
$0
I
Other
Dep. Method
Dep. Period
^
* • • >,
Salvage Value) ,
laier,',^
Dep, Method _
Dep. Period
,
,
Salvage Value [
; *"l'« ', LI
ddb Investment Year
5.0 Lifetime
•^jsr
( .='^,1,,^.,^,,,^ !
-w= ^B««|
| TOTAL
jS^ t v%
,'dab: In vestment Year
5»t) Lifetime
f v
H
p
TOTAL
lnv-Alt1-pg2
. " 0
- 15
f -f A ™,
^* * < * '.
* * ^
r
•"jj i f °" ^
$0
B* ' ^ &*,», ** ^-
>' "^ *0
r , ,15
?-
'
«
$0
-------
INITIAL INVESTMENT COSTS - Alternative Scenario 2
Alternative Scenario 2: Alternative Scenario 2 Name 9/1/96 lnv-Alt2-pg1
Initial Investment Costs
$ Amount Initial Investment Costs
Purchased Equipment (Purchase, Tax, Delivery)
Dep. Method
Dep. Period
*> dflb
, C . 570,
Investment Year
Lifetime
Process Equferoetft ^ ,*. i * *'*.'», *&
Storage and Matenals Handling, Equipment ' ' •
Safety/Protective Equipment ,
Monitbring/Cortfro! Equipment
Laboratory/Ana
*, ~ *~ ,, T
k •>,-*«•$* - '£ 'x-T»
" " s * ~ ^* -.%I%- ^li»w" • > %7~ f **^ "*"
^ - "• * „ « " „ " r« "^itf- "~-."°~
-" ^ *"<*- ** *,v5 . TSr^r <• .
Spare Paris *"
w ^ ^
Salvage Value |r
* ""* «£ * ~S *>"L, „' !
TOTAL
'<• -T«r ' 0
I -, 1 J 15«
? r ti* j-i '
•5 n,^5°i-«-< f
1 'O^t
I _s- 3$
i i-
"" s
*_ i- * / *_<
J */L-k" _ L "
f it i
^ ^ j ~ --
$0
Planning/Engineering (Labor, Materials)
Dep. Method
Dep. Period
"*-, ^ "ddb
,„ -5,0
Investment Year
Lifetime
In-^ouse Planning " '^^
In-riouse Engineering/Design - " ^t * , " £ I
Procureraerrt , *,'«.< "r"_ "v>- _,
Vendor/Contractor Fees '! „- '<- '„">*>£ S^
*- ^ - * *''! -."'i **• "I? /^ T
" ' * „ IK " > ** *^ J%> *>-1. ^S " .»j
Salvage Value | ** •>
;" v -i^''-*;
$0
Construction/Installation (Labor, Materials)
Dep. Method
Dep. Period
In-house
-ddb
'5,0
f ^ ~* ^ ~
Investment Year
Lifetime
» < t ,' t"*~-J-* ' '•
Equipment Rental ' , zJ " * "^_ *«
Vendor/Contractor Fees " >*<*.* *ivu^^'r
s
O - * 5
V \ ? 4v^*V*-"'-
_ - *^, '""'*,";
Salvage Value! T
I
Permitting
Dep. Method
Dep. Period
In-house
Permit Fees'1
"" ddb
50
.,
»T*
TOTAL
Investment Year
Lifetime
. -'
»^ ^ *~ ^ ^ ^
> --, a
$0
- i ' •>• " 0
s »U ' t5'
sv" ~ r
* •"* *. i
*~ *™ n.-
$0
$ Amount
Utility Connections/Systems
Dep. Method • ddb
Dep. Period - 5.0
Investment Year
Lifetime
EtecteicBy "<• * *„"*„,? ,1 •*!""* »^:
Steam' ,. * ,„ !j\ ^ •» ^\ <\ ^^
Water r ^. J." ' "-L^^" "S4> -^ ^"Vfi!
Fuel
"* /- * ~
* ,\" „ - ^ fe.
Pfant^* *\ ' ; ** ir ~* ^
InerfGas* ^ '„ „ „ z^Jg \">&^ " 4,
Refngeraibitv- -.' v' , " ' t - - ^* s^S
Sewerage * ^v.
^aL^iilimblhCT •» x
Salvage Value) ' *" ^
Site
-^ -r* , ^ Vi ft
^ S ' ^~~
TOTAL
/ J.&
X ^ '-"IS-i
r i , ^ ^
V ^r' ' ' ^
• / 5 £ -
I ? "xi'
'*• ^ 4^*:
u"' % r
TnaTs/MarttifectBiingJ^anances ~ XJ,
Process/EqatomentTraminq '
Safe;
Sy^nvirDnTOental T*airinal
vtendoKContractor Fees -
Salvage Value | v
Working Capital
Dep. Method
Dep. Period
•».
Salvage Value
ddb
5.0
, t,s
^ * %r
' Tfc ™,
" ?
Investment Year
Lifetime
-«•<». ,
~ < ^ >s, *""".. '
% j--~ ' "*;«* *
TOTAL
, , >• "0
< , . ' AS
J> ^ <
___ J
' x" -. "J
$0
f« « ,4, ^ "„ j
~ «. A i- K
TOTAL
Buildings & Land
Dep. Method •" ddb
Dep. Period , 1 5.0
Investment Year
Lifetime
- " - ** '~- -T ' ST» V3ii
<•*£./ - , s * \ "" t,* ^"^.^
—
^^ >> f ^
^ -- *x* " «.
Salvage Value (•" , ,(.
~?t iVjt i
, ^'i ^j*-^ ^ *
TOTAL
Contingency
Dep. Method "^ ddb
Dep. Period i5JL
•J* 5 ^ ^
Investment Year
Lifetime
«. »*•*• ^ -i ^
' " ^ - ^' ^ ^v -*, ~' *s
' " -~«r -t- ^ ^ , ^ - *~ j1 *' - .*>.»".',,,
Salvage Value :t ,
TOTAL
J «. **"{}
"f5
->
1 '>** ' J.
' t .* J -' •
• •,.
$0
"Q.
*
j3 "" % "
»J. "("''
$0
Z* J 0
I*"" V »t5
_n-°"
, ~ i i\ t
, ^
-K "X.1*
$0
5 - -*" o
•*•
s^
r " V? *^>'
$0
-------
1
Other
Dep, Method
Dep. Period
Salvage Value |
Other
Dep. Method
Dep. Period
.
Salvage Value |
ddb Investment Year
5.0 Lifetime
•
t
| TOTAL
ddb Investment Year
5.0 Lifetime
•
| TOTAL
0
15
ttM,
$0
' o
. 15
~
$0
Other
Dep. Method
Dep. Period
*
Salvage Value |
Other
Dep. Method
Dep. Period
-
Salvage Value |
ddb Investment Year
5.0 Lifetime
,
it i *• '"^'
, , t „,..„, ^^
* * * "e
~vt »t
r i ; ;-
TOTAL
dSfa; Investment Year
5,0 Lifetime
, , ^' »,iZ|l
| ^*v
. ^ ^^
! " w
TOTAL
lnv-Alt2-pg2
0
15
n *
* •?
*^ i%
$0
-„ a
-iff
., -
* *•* , ^*
' , x' * _ i.
, ,
$0
-------
INITIAL INVESTMENT COSTS - Base Scenario
Base Scenario: Base Scenario Name 9/1/96 lnv-Base-pg1
Initial Investment Costs $ Amount Initial Investment Costs
[Purchased Equipment (Purchase, Tax, Delivery)
Dep. Method
Dep. Period
Process Equipment"
ddb Investment Year
' ~*5£- Lifetime
^^l*-^ .^""f *« """ *"*'
StoiageandlJidBn^telfeadlingJEqufeifnent „"" ~
Safety/P^otecbveEii^meM^ - — *** "** '»*** lir. / •
saonttojSr^eojtejTEquipmeBt ^1 2-^-^ \.' -.?
LaboratoTy/AfiafetfcalEaaipment- s -k"1-" c^
* ^ "*">'" ' -*• --> '-„
7 ' -* "' *.,-<
~" r * "^ ti •=."" 1
Spare Parts >-
Salvage Value |
^. ^ Vu - is -*" ^
" .^ ^ * ^jf ^
^ \ TOTAL
v " ^ o'
'"15-
" * " ^ *
^C^ s 1
«,
1 e. ~f~ >
. ^ U t "=«•
^
V
"t"^~ ~
<•»
$0
I
(Planning/Engineering (Labor, Materials)
Dep. Method
Dep. Period
In-house Planning v
ddb Investment Year
510 Lifetime
*, * l^ "**
In-houseEhgineemo/Destgn ^*" - ' ^T »"~
Procurement * ,, i^V'"~i*_'»~ i"
VeRdor/ConbactorFees " "~'x*"%i.' "*•"•"» ^. f «.
*~ ~ , ~ ' *~* ? **r> 1 ' ^*C^«* .
"" ! . •» iw_<; ~ * ^ * ~ '1 •*" !fTr£L?
Salvage Value]
TOTAL
0
15'
*"£ ^^.^ C/.T
'"% j r.~_
: „' 1 * a.1
" j- * " •"
"^ „
"i V < fa.
$0
| Construction/Installation (Labor, Materials)
Dep. Method
Dep. Period ~>
In-house - - *
Equipment Rental
s ddb Investment Year
" '®0 Lifetime
v -*, -^ -| " >
j. 1 j '
Vendor/Contractor Fees '_ i^,^>« i i
'»* v *°^i5!^ "1 _£ "" *"~ :
' «- , S * * , r -r -% ,^,1 ^
Salvage Value |S *
(Permitting
Dep. Method
Dep. Period " "
rndfouse"- "* . "
TOTAL
0
" x- ,15
•»_ ' ^~ ^»
fc i
> > " !**•"*•
^ ft^^ ss«, ». ^*
Tl- ~w» k
$0
^ r ddb Investment Year
, ,5.0 Lifetime
"»--'"«>'" f1" " s*"" ' *^
EerrnitFees- "^ /" • ,™ l"™' '*" ~* ^ !« *.
Vendor/CbfltectorFees -r * ~ *>"lr
, ' v ^T» ,~Ji < ~Tt ?£i~*-'* ••
Salvage Value |
(Working Capital
Dep. Method
Dep. Period
* -, ^ ^
\ TOTAL
0
f *" >15
* ~ je- ~^ .
TO^""^-*
i- ~* ^ t" *
s. -« *«,-
$0
ddb Investment Year
- 5,0 Lifetime
,' -«"" •* "*" ^*tr>>- 'i '
_, «» .- , "*"* «_ **_ '>" ->**"
, <• „ ' - •'"* •> ^ i*** ''-
Salvage Value)
TOTAL
l^ , /o,
. ^ 15
~, , T
t -*" t
' „ E~ -"*»J *
$0
$ Amount
Utility Connections/Systems
Dep Method
Dep. Period
ffldb Investment Year
5.0 Lifetime
ElScfriefty- "x " ' ' > , *« /,'' ^
Steam * *• ^ s -j-4 ^ ^ c^
Water ', , l "* ^ -,-> * t*J*
^eT "
" * '^«. ' ' ' . *S
BfentAt"" , ^ „ ' ' ^ s^'i '* *
Inert <3is ' r
^V~. . "L*. X
Refrigeration -• t " *' * ' >" & t "
Sey»erage ^ *k'* (" ^ -> " * ** tr*"
©eaeralflumbtng . '- ^"^
Salvage Value | •
TOTAL
0
, , , 15
(• "" "_ '
k ,, ^
1 ~, ^ ^
\* ~^^
^
( « •" w~j
^ ^T -*».'*
'* **
X 1
Salvage Value |
Buildings & Land
Dep. Method - »
Dep. Period
„ kl- " »
TOTAL
0
",» 15
•N ^. ^
jr »
, ,*~
^ „
1 ~ X
$0
ddb Investment Year
5.0 Lifetime
-^ i" "*",!. 4 ^S ^v
i> y '" - » ~ -, r
f> f * "• , * i ^ -.T _~ -c
x " " » ,-- »*""* "
Salvage Value}*
Contingency
Dep. Method
Dep. Period :
TOTAL
,0
, 15
" u "
*^ i>l
'
5 -^ z^^
$0
-ddb Investment Year
5;0- Lifetime
' rT ' \ "*• •" < *
"*>> . - ' r "
"~ t ^"^"^ *" *
Salvage Value |
TOTAL
0
- 15
- yr 4
' _ "" - t * '^
<. *J '
$0
-------
Other
Dep, Method
Dep. Period
Salvage Value
Other
Dep. Method
Dep. Period
Salvage Value
ddb
5.0
ddb
5.0
1
Investment Year
Lifetime
TOTAL
Investment Year
Lifetime
. : '..'..'.,.' ... "L
- ! - '. ,.,,.•-...,.
TOTAL
0
15
^. i
$0
'.~V. : :. ..; ':1:W..
•• ... • •-. ,' i15
.......•.-.:,!. •-....!;;_.
-- . J : .'. •- '•-••^^.
$0
Other
Dep. Method
Dep. Period
-
Salvage Value!
Other
Dep. Method
Dep. Period
Salvage Value | -
ddb Investment Year
5.0 Lifetime
1 -tj <
»-, ^
'* ' " >* »
'„
«?*
TOTAL
ddb Investment Year
5,0 Lifetime
» . <»>
, ti
\
TOTAL
lnv-Base-pg2
/ ' 1r15"'
, ' .
^'"' '
*„
-
i
$0
/ ' , "'0"
* us
' f '« J
I,
w
$0
-------
ANNUAL OPEI
Alternative Scenario 1 : Alternative Scenario 1 Name
Annual Operating Costs
Direct Materials (Purchase, Delivery, Storage)
Escalation Rate f * 0.0%| Start Year
End Year
Raw'Materials- v~ ' . -! * ^^
Solvents " C " ~ " -C > * ^\f t ,~
Catalysts" " " •> * ; "~\r ' -* / **&'
*" ~3 J ">*< *> Cfi'^"
M ,r *•«*!"< *~ fr -~l ft-
~ •* * « j> v ^ -> * <,» ^Ir r
-v i r ,,% v ^ ~v „
< ' f/s~ ' Jsr*" ^,V
""»» ^ ' * K »" ^ ' ~
_ " \ « ^**i- *-rv2
TOTAL
Direct Labor (Wage/Salary, Benefits) J™
Escalation Rate[ y j.0.0%1 Start Year
End Year
Operafihg ~ - - •*,„•?*«, *.
Supervision „ , , "* f V " *
Manufacturing Clerical » , ,,i<-' ""„"
Maintenance- * ' ,. 1 'C-Lcf J=u ^ „
, - -^ % i 4 \ •» ^
? ^ - *•* , » /- ; ^4, ?•
TOTAL
Regulatory Compliance (Labor, Materials) ll ""<•
Escalation Ratef 0.0%| Start Year
End Year
Penniffing . „,-/',_
Training " -Kr"' »*:„»'> "*
Momtoring/taspecfions., ' „ „ ,,
Testing ' ^ . \ 51 - - < »^_.- ',£ >CJ
Generator Fees/Taxes \> „ «, ,«,- '*•
TOTAL
Product Quality (Labor, Matenals) "^
Escalation Rate h 0.0%) Start Year
End Year
QA/QC » » ' ' v LV * ""*" ' < " * ,-xJ
Product Rejecfe , w" **'•>-* i «»
Product Returns > ^ ^> ^,- *-! r »•
-H" ' I "-• ^ -C > v * '
TOTAL
Revenues - By-product ' "'-"-?
Escalation Rate| 0.0%j Start Year
End Year
Marketable By-products «. * '-f - ^ x
Marketable Pollution Permits r ""• '-*
f>^^ ^ ^^ ^ ?
TOTAL
RATING CC
$ Amount
«¥ft^» ->->-^"J*- ^JS" f
*•&>%• "
*. 1
"15
*«~ f- ^ l
• x.', « I *w
r nl-*^^^
"" < Z* ^^J^Sf^,""
* i
"*1. >^i^ *.
^ ^ * j~
^ ^ ™!*J 4T
-* j-
^ ^
$0
.. — — „
- " ^ 1
ts
1 *
i J,
*^ B. I J^
"
u ~; -
~~ »»
$0
r >^-^ " K^^atr-^-
f
;-5". ^ 1
. "' 15
T* si •>
/•
F
V * 5
•> -5.
$0
^ ^* _£^~ j- -( 4
,1
' -~ '15
< >*> ^ p f
r " •, *
-
~»
$0
•^f ^ X. -^
" t? "*
r 1
r* ?^s
- * ~ \ ^
*~ t ' 'L^
K I j
$0
>SP
9/1 /9€
I
5 - Alternative Scenario 1
Annual Operating Costs
Ufflifies " -.,„-''*'"-"; "^
Escalation Rate | 0^)%| Start Year
End Year
EtecfricHy ^ ^' ^V -* ~ , ^\\~f
Steam „, J ^"- " ^f*-^f
Waiet/ " «, *' - " - . '-*r * lil^'-r,
Euel * " •*' •=; - " '-^ ;^J-
PJanlfAir , -~^f4lf~* y-;
InertGas <, " ' >:'^*' .'" * ,
KelBaeratton ^ ^ * "'- ^
Sewerage , ' f *""'. "" -> >%«•*-,,
j J >• I* •" i ^»v »"
TOTAL
VfesteaSanagement (Labor, liaierials) ".T 7"
Escalation Rate| •' 0.0%j Start Year
End Year
On-sTte Handling &5torage „ " -
On-slte Pre-teeatment , -, • * C, , * :
OR-sle Treatment" -< , ^^ .^
HauRng ^ - T •--,,%
Qff-s8eTreatraenf t ' i " • ^,
Offisite Disposal , " .„
TOTAL
Regulatory Compliance (Labor, Materials) #2 1
Escalation Rate 0 0%j Start Year
End Year
Labeling - , i_ I'1*"
Maiifesting' , >/, .^r
RecoFdkeeping 1 -*.
Reporting v "•!/•« -,, ^ ^ "
% ^ \ ^f?- * ^ * rjr
TOTAL
Revenues -Product ^^ ,- ^ 4
Escalation Rate | 0.0%j Start Year
End Year
Cha0ge,in,Pjroducf Throughput. ' <"'***„
Change in Market Ssare ' '- , „ .^x .
•^ "^ ~ - ..Vj -' *
" - -'J " ,
TOTAL
Insurance " J »,rx'v""^"
Escalation Rate | 0.0%| Start Year
End Year
Workers! Health Insurance v - ? *• •
Workers* Compensation r ««-.».
Pollution Liability Insurance "• - * 5
TOTAL
OP-AIM -pgi
$ Amount
j T-JJ.-T. _.
~ ' C, " ^
^ 1
• ^ 15
^ ,f ^-u^
if " f * i.
Jt" , "C^\
" "
- - ••
-
-S "
"fc*
$0
w "^ " " sX' r^^ ^
v-? 1
'715
• -
-a j, ,j
"*
* ' a5" *""
>~
» ~ 4<
$0
—
M
, v *15
»
.»«* * T
— w 1 ^ '*,
*" V
«> V
$0
i „ ^ J* ,
"1
, ^tg
E^-> x
fX~ 1 ^
•« -> "^
M. ^^ ^ ^
j «. j r 5
$0
"S v" _ Ps-~ "f
') ~ 1
,'•> ,- f ^15
-' ^^ ;•"• '"
^ *G ? ^
™< '">**-
$0
i
-------
Future Liability' B
Escalation Rate) 0.0%| Start Year
End Year
Ffoes/PenaMfes . . ...... . i: .•'"—;, ;'.-
Legal Costs . ..'• • "•"•.".,. "r.Z1 ,::T.-
Pireonal Injury ' . '" : ".'..' "..'.'";•. 1.:'.7"
Property/Naturat Resource Damage *.-,,;::;,
Remediation . : ..'"'.... . ". .',".;.'£."".
TOTAL
Other ........
Escalation Rate I OJ)%| Start Year
End Year
, .; ... ' • , -1 '.*'j| J1)
^
/. ' ;
•
TOTAL
. ' •:'•- . '•-•',. •".'•>.-, ,•
'. ^:--:: "";'.,!
': '' '• ^. ..'^te
-;. - .;^.":..j.;!Tj.'.15
•:l,':.-i!":i'..'iV;'.'
1 '''- ' •••?^:™!i-i'*!Tt!t-."i* •
•.V.-;-;^;. ;•,;;• r-v:
:::_-; "•:;;" *^;;:
j •''_"; >..:,' :^ r
$0
H •, * "-i" "
• ;• , l- ' 1
15
•1 -„ -s •_ ,
, *
$0
|
Other
Escalation Rate | 0.0% | Start Year
End Year
«», . 3 f- '
Li- TotflF
I f^'
•• -»!.« ««.,h«,'f4
T ^°^
TOTAL
Othw " -r-^
Escalation Rate [ OJO%| Start Year
End Year
^ ^4 V
„ r.%./
•^tks^te-^ s-T^, i;f
su^niae f *W *
TOTAL
Op-AK1-pg2
f ~,,|?" . C*
, it" jr* VT
' t
15
^< l
' > , :
i " i i"* Ji
*• ,
if^j. 4
$0
\ i^Wl
• ' >,' 1
. -"> 15
£*"V
f
w.
L /
$0
-------
1
ANNUAL OPE
Alternative Scenario 2: Alternative Scenario 2 Name
Annual Operating Costs
Direct Materials (Purchase, Delivery, Storage)
Escalation Rate | * 00%1 Start Year
End Year
Raw Materials "T.'
Solvents "^ ^ ,. >., ,. **• 7
Catalysis ^ /j r* g f •"* -v, _ .» •« •o
* V&XbW> A^- /£.
r " * * *** *£ * ^ ** ** ""
*w?5
* ,1 " .-V «»,*- Itf'X, '« "^ -V"*
~ *• •»»•> i -i <- -i>Jf / *
~- *~ * w*E ^- - *
,*,». ! -• U „ £
* t> T !•» •" •» * t
TOTAL
Direct Labor (Wage/Salary, Benefits)
Escalation Rate | 0,0361 Start Year
End Year
Operating ,-,"*._' * * ' - < "**'
Supervision -T" ^_" t ~ * "LJ-i
Manufacturing Clerical » *- \ , ^ "* „*
Maintenance "" " "" J;*- "%„"*-.;>
"^ ?»• * fj J w"*" *** S """«'
t *-* " > _ K T /• \ s
TOTAL
Regulatory Compliance (Labor, Materials) #1
Escalation Ratel '0.0%) Start Year
End Year
Permitting "- - "",""' t ^ * ~ ^
Training r , ""i»-,->», *'„,
Monitonng/lnspecbons ---» *» , •» 4
Testing • *"".,, •"' «."**•"'- ,' — * ^ 7*
Generator Fees/Taxes " ^_ " si?3' * .T'^J,
TOTAL
Product Quality (Labor, Materials)
Escalation Rate| 0 0%1 Start Year
End Year
QA/QC * > kj™ (.*•"- -_i?>
Product Rejects ' „„ r P'
Product Returns i -, t "^V-*^ -TTi'
" - ^ ' *„ r ""^ ^ T ^ s
TOTAL
Revenues - By-product
Escalation Ratel " Q,0%| Start Year
End Year
Marketable By-products ~' " ^ " » '-"""*
Marketable Pollution Permits , ^ ^ « i", » ,
( -. ""»"' » ' ,«*«WJ -__0 .r— JJ-»»_
TOTAL
i RATING C
$ Amount
%f - * t
„ ' , itS
*
- f i,.
r
/
•V
" *
V' T"S^r i,
i'f
$0
• ,•* -" M
- "">r ~ 15
•>J-
m -<, 3 **
i "" ™. - e1
• ^ -•• „ , ,
*„. ^r «»
-W ^ /f
$0
- ™,A ^?,1
^- . 15
* t* > ,. > '
3»
s? „ jf f ;
, * * JL
i_, " ^ „
$0
*i > 1
r - 15
- /* <, ' - "
"! ~*
,
TV" 2
$0
_-"1
- J,,- ' "15
i ~ * ^ f"
>, „ "" * ,
1 " „'
$0
OST
9/1/96
|
S - Alternative Scenario 2
Annual Operating Costs
Utilities
Escalation Ratel Q.0%| Start Year
End Year
Electricity ' " " ' ' &#£ t'-iu
Steam " , :>-"^ T'f
Water c , " - ' - -4 „ y,v, a.1-*-. •
Foe! « x« _ * *-«>i "', '— ,c
PlantAir , " > * ^ t
tnertGas* " *4v . * <„« a*
Refrtgeraflon ' ' - ** „ ».-<"
Sewerage - , ^ I ^'"h ~* ~»
i s > /• ,~>
A. ^
TOTAL
Waste Management (Labor, Materials)
Escalation Ratet " O,0%| Start Year
End Year
On-sfteWandifng & Storage - K -> f
On-sftePr€-treatment " • - >",,*"«"
©n-slteTreatment , . v "" ' t *
Haulinaf -*. „ " • , ,-= N. > „ ^
Off-site Treatinent - ,-,,,.,,
OlPsSe Disposal . ,-, - - ~
TOTAL
Regulatory Compliance (Labor, Materials) #2
Escalation Ratej * 0.0%| Start Year
End Year
Labeling > / ,$
Manifesting •>" t- -•
Recdrdkeeping "v, „ , ^
Reporting •*-•*' '/•>*.•> - 1
, •< -v ', t~, -,f "
TOTAL
Revenues - Product
Escalation Rate] - 00%| Start Year
End Year
Change in Product Throughput ^ , Ja
CHange in JBIarfcet Share - ^ "» ^
" -t _^>- i - - «t^ " „»
- •>• v ' * - < J**.»v^'lh
TOTAL
Insurance
Escalation Ratel -00% | Start Year
End Year
Workers' MeattWnsurance „„*(•,,
WorkerS:* Compensation v •" - <• r -
Pollution Liability Insurance "".?•»
TOTAL
Op-Alt2-pg1
$ Amount
> t
" , v"*-f5
V - ~
•» v- rfl
* ** " _-^4 ""^
• T «ts •»
*< „ ^ ^ rtSft.
j "„- "F
%.: j«
^ 4f, «*.ji
•- ^
•~^
,f ^,
$0
^ •'t'
( " K >15
^ - IK.
•. -, -o*"1 <
" ^S
> «
>
, r
$0
' * .-1
15
? v •
"*ju
, ""/•
slj^ •„ J- ji
$0
»- -.«- k, ^"1
,- >.^ 15
V ' >- J
i"' ^"
A'6"r_1' tf
-, *tlt
$0
Is* 1
-7 t, f 15
~ *"-
" ?
^ f
$0
-------
(Future Liability
Escalation Rate) 0.0%| Start Year
End Year
FJnes/PenaMJes • '.'.'.-.. ::' ':
Leoaf Costs . •':.-...• .'. "I:.:
Peisonal Injury _. ' .-'.•''.-
Property/Nafural Resource .Damage !".'-', ~ .'' : :'
Remediation
TOTAL
lother
Escalation Rate) 0.0%| Start Year
End Year
' . • • u
TOTAL
. .•:•. .':"- -.;:.,1
. • •--:/. -:;'15
•. .. :' ..-. : ,:_.::,;,
. ' ,. . . • _ : '',''•'
$0
\
15
•
$0
Other
Escalation Rate | OJO%| Start Year
End Year
, •, -tit
^
i
r
TOTAL
Other
Escalation Rate | 0.0% | Start Year
End Year
' J '
j
•«*> » f
•Si is
TOTAL
Op-Alt2-pg2
. ' '1
15
",
, „
-
-
$0
1
" , I , -15
/
^ „ „
' > l
'E B* ^
$0
-------
1
ANNUAL OPERATING COSTS - Base Scenario j
Base Scenario: Base Scenario Name 9/1/96 OR 1
Direct Materials (Purchase, Delivery, Storage)
Escalation Ratel „ 0,0%) Start Yeai
End Yeai
RawMafenalsA . r" vi- ^ *^z* t v " ^<-
Sotvenfe - ' » i'1.^ -Jl"*^!L»5 J'-ttir^ -,^ Js' , *, „ i ^"-^JA ' "jjSi-"
" '"/'w^^ V -,"4 ,T-i^# "V,.v
"*•*."'. Vt ' '>" ' -^^^S'
V '»" » " i- "1 ^f~<1;>
^ ! t. j- "*
"S r; \
--' yx, „->•
.1 i! ^ 7 - /
•c^
HI.
$0
Escalation Ratel - QI<)%<| start Year
End Year
Opetatirig " ~ ,>, 5^"'
Supeansion - _H" *' '- „ „- ^-"
Manufacturing Clerical "v _^ *• % ^-^
Maintenance * ,*,.••-, ^ » ; ,
~"* ' . > 'f-
TOTAL
- n t
^ ?" 15
' £ J <*••
"~ * *
" '" f
$0
Utilities
Escalation Ratel ^ 00%J Start Yeai
End Yeai
(Regulatory Compliance (Labor, Materials) #1
Escalation Rate) Q.Q%J Start Year
End Year
Permitting .,„ - r t, -• — a./^-/ ^ <• ~*f
Training *> * ' ' ? r - - ' : • *•
Testing - , A & ^ T~. '__ ^t, *>"iv*' "•*•%
TOTAL
Revenues - By-product
Escalation Ratel % 0,0%| Start Year
End Year ;
Marketable Bv-Droducts - -* ,
Marketable Pollution Permits , fc _* ^
- , " . f .- «f
TOTAL
1-1
V" 15
* « 3
f-
$0
- f
'^"r*--^,-'15
* v. "* ^~~
$0
* f
^ . 15
r
$0
\
Elednotty „< ^' . . ,T V,H
Sfearo' ? e-> ^ ; " ,-* v > if
S^er ' „ , r, . ,- - ^ ~
ESet-C, ^ , '- I ^ ^ " ^.- ""':
PlantAtr " , -' * I '" ^ ^" j
inert \jas „ '-, * -^ »'^ -^ •m
Refegeaation B -=, a-4V-
Sewerage , " i
«~» ' • «, ^ ? - j, *•'
TOTAL
| Waste Management (Labor, Materials)
' «"* ^
»'» ' „ t5
iw-rf 1 j- f -y- rt
^ ^ **"-%* i
A^" -H
^ f"^
K
f 8r
N JT "%.
$0
Escalation Rate!" ' Q.Q%] Start Year
End Year
Qft-stte~Handfing & Storage
OffesTte Prestreafanenf „ " , v "
OrT-sifeTiPiatosent
HaulihB,* ^ ,~ ',
Off^rfeTreafraent , J1'
Off-afeDIsposaf / ^- -,f>
TOTAL
Regulatory Compliance (Labor, Materials) #2
Escalation Rate) OJ3%I Start Year
End Year
Labeling - * •• **'
Manifesting ,. < ,% -T*, ^
Reporting " » V
TOTAL
Revenues - Product
Escalation Rate \K'SmmiffW^ Start Year!
End Year
Change in Product-Throughput _."- , t
Shange to Mafteef Share * - *»;• *-•
TOTAL
* - — , _ •(
i • ' r -1 15
. — ; — __
• $o
-^ 1
' - U 15
% ' , -
$0
.. * _ ' "-1
I „ " " IS
i> * ''
-• "" ^>^-r ^
$0
nsurance
Escalation Rate) , 0.0%) Start Year
End Year
/Vorfcers'.Healfh Insurance ,, - - '
Workers Compensation *' "
'oilutfon Liability Insurance - • «- -**
TOTAL
» "» ii^ 1
' U-15
$0
-------
1
Future Liability
Escalation Rale) 0.0%| Start Year
End Year
FlnesflPenattfes ...-.'.--. . .,
Legal Costs •- • - .,;. _;,,;;,•,•:,'„*
Persona! Injury •
Prooertv/Natura! Resource Damage
Remediation . - ' ' .-• -- " -..'....'
TOTAL
Other
Escalation Rate I 0.0% | Start Year
End Year
TOTAL
' '•: 1
•••:""•.' '15
• :••. :;1 :•'..-
$0
1
15
v
$0
|
Other
Escalation Rate | i 0.0% | Start Year
End Year
•if J1. '
f A
* „ I, V
L,' X-
' r V
TOTAL
Other
Escalation Rate) 00%| Start Year
End Year
~
*•- ^ •*«
? j <&
- '"'I
TOTAL
Op-Base-pg2
1
1 ' 15
•> *' "
j
$0
1
15
i
,/
$0
-------
SCENARIO SUMMARY -
Alternative Scenario 1: Alternative Scenario 1 Name
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 12.0%
Aggregate Income Tax Rate 41 .9%
Default Depreciation Method ddb
Default Depreciation Period 5
.9/1/96
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
Alternative Scenario 1
Summ-Alt1-pg1
Salvage
Value
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
Depreciation
Inv. Year Lifetime
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
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
-------
SCENARIO SUMMARY - Alternative Scenario 2
Alternative Scenario 2: Alternative Scenario 2 Name 9/1/96
Salvage
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 12.0%
Aggregate Income Tax Rate 41 .9%
Default Depreciation Method ddb
Default Depreciation Period 5
Cost Value
$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
Summ-Alt2-pg1
Depreciation
Inv. Year Lifetime Period
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
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Method
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
Start Year End Year Escalation
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
0.0%
0.0%
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 PARAMETERS
Default Investment Year
Default Lifetime
Default Start Year
Default End Year
0
15
1
15
-------
SCENARIO SUMMARY -
Base Scenario: Base Scenario Name 9/1/96
Base Scenario
Salvage
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 12.0%
Aggregate Income Tax Rate 41 .9%
Default Depreciation Method ddb
Default Depreciation Period , 5
Cost Value
$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
Summ-Base-pg1
Depreciation
Inv. Year Lifetime Period
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
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Method
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
DDB
Start Year End Year Escalation
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
0.0%
0.0%
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 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: Alternative Scenario 1 Name
Operating Year
Depreciable Initial Investment Costs
Expensed Initial Investment Costs
Workinq Capital Initial kwestmentCosts
Tout 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 tor depreciable categories.
Purchased Equipment (Purchase, Tax, Delivery) (DDE)
Initial Investment Cost and Remaining Book Value
Utility Connections/Systems (DDE)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDB)
Mai Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Constructton/lnstallatlon (Labor, Materials) (DDB)
initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
PtrmKUna (DDB)
bvHial 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
Othtr(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
9/1/96
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Tax-Alt1-pg1
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
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
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
-------
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 InvestmentCosts
For each category; the top line indicates the tax
deduction taken in that year, including expensed Hems
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
Tax-AK1-Dd2
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
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
Q
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
o
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
0
0
0
0
0
0
o
0
o
0
o
0
0
0
o
0
o
0
o
0
o
0
o
0
0
0
o
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 Capita) Initial investment Costs
Total Initial Investment Costs
For each categor/, 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 an 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 (DDE)
Initial Investment Cost and Remaining Book Value
Planning^Englneering (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Sit* Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
ConstructlonJInstallation (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)
Infttal 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 PDB)
Initial Investment Cost and Remaining Book Value
Total Depredation
Expensed Initial Investment Costs
-Taxable Gain (Loss) on Salvaged Equipment
Total Tax Deductions
9/1/96
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Tax-Alt2-pg1
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
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
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
-------
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 (DDE)
Initial Investment Cost and Remaining Book Value
Planning/Engineering (Labor, Materials) (DDE)
Initial Investment Cost and Remaining Book Value
Site Preparation (Labor, Materials) (DOB)
Initial Investment Cost and Remaining Book Value
Construction/Installation (Labor, Materials) (DDE)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DOB)
Initial Investment Cost and Remaining Book Value
Permitting (DDB)
Initial Investment Cost and Remaining Book Value
Buildings & Land (DOB)
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
Cither (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
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
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
o
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
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
o
0
0
13
0
0
0
0
o
0
o
0
o
0
o
0
o
0
o
0
Q
0
Q
0
Q
0
o
0
0
0
Q
0
0 -
0
Q
0
g
Q
0
0
14
o
o
0
0
o
0
o
0
o
0
o
0
Q
0
Q
0
g
0
Q
0
0
0
0
0
0
0
Q
0
0
15
Q
o
0
0
Q
0
Q
0
Q
0
0
0
0
0
0
0
0
0
0
0
0
0
'
0
0
-------
TAX DEDUCTION SCHEDULE
Base Scenario
Depreciable Initial Investment Costs
Expensed Into! Investment Costs
Working Capital Initial Investment Costs
Total Initial Investment Costs
For each category, the top Una Indicates the tax
deduction taken in that year, including expensed items
and depreciation. The bottom line tracks the Initial
Investment Costs for alt 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
PlannlngflEnglntering (Labor, Materials) (DDB)
tnlfal Investment Cost and Remaining Book Value
SK* Preparation (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
ConstJuettonflnstaltatlon (Labor, Materials) (DDB)
Initial Investment Cost and Remaining Book Value
Start-up/Training (Labor, Materials) (DDB)
taKM Investment Cost and Remaining Book Value
Permitting (DDB)
InMal Investment Cost and Remaining Book Value
Buildings & Land (DDB)
Initial Investment Cost and Remaining Book Value
Working Capital (DDB)
tnWil 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 (DOB)
loWal 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 Mai Investment Costs
Total Tax Deductions
9/1/96
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Tax-Base-ps}1
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
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
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
7
0
0
0
0
0
0
0
0
0
0
0
0
c
0
0
0
(
0
0
0
0
0
(
0
I
0
I
0
-------
Base Scenario
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.
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
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
o
0
o
0
o
0
0
0
0
0
0
0
0
0
0
0
0
0
11
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
o
0
o
0
o
0
o
0
o
0
o
0
o
0
o
o
0
0
12
0
0
0
0
0
0
0
0
0
0
0
0
0
0
o
0
o
0
o
0
o
0
' 0
0
o
0
o
0
o
0
o
0
o
o
0
0
13
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Q
0
o
0
0
0
0
Q
0
Q
0
Q
0
Q
0
Q
0
0
14
0
o
0
0
0
0
o
0
0
0
o
0
o
0
Q
0
Q
0
0
0
0
0
0
0
0
0
0
15
o
o
0
0
o
0
o
0
o
0
Q
0
o
0
0
0
0
0
0
0
0
0
0
0
0
0
0
o
0
-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 1 vs. Base Scenario
Operating Year
INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase, Tax, Delivery)
UtBiy Connections/Systems
PUnnlng/Engineering (Labor, Materials)
She Preparation (Labor, Materials)
ConMruciionflnstalatlon (Labor. Materials)
Start-up/TraWng (Labor, Materials)
Permitting
BuJkfings & Land
Wooing Capital
Contingency
OUter
Other
Other
Other
Total Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTSJ/SAVINGS
Direct Materials (Purchase, Delivery, Storage)
UtWes
Direct Labor (Wage/Salary, Benefits)
Waste Management (Labor, Materials)
RegoWory Compliance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues -Product
Revenues - By-product
Insurance
Future UabBty
Other
Other
Other
Total Annual Operating (Costs I/Savings
INCREMENTAL TAX CALCULATION
Annual Operating (CostsySavings
-Depreciation
- Expensed Initial Investment Costs
+ Taxable Gain (Loss) on Salvaged Equipment
Taxable Income
Income Tax at 41.3V.
INCREMENTAL CASH FLOW CALCULATION
Annual Operating (CostsySavings
• Income Tax
- Mai Investment Costs
+ Recovery o( Working Capital
+ Salvage Value
After-Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
9/1/96
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Cash Flow-Aid v. Base-pg.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
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
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
c
0
0
0
0
c
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 (COSTSJ/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
I
Cash Flow-Altl v Base-pq 2
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
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
0
0
0
0
0
0
0
0
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
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
Q
0
0
0
0
0
0
0
0
0
0
o
0
0
o
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
o
0
0
o
0
0
o
0
o
0
0
0
o
rj
Q
Q
0
o
o
-------
INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 2 vs. Base Scenario
Analysis Name: Blink Spreadsheet
Operalttig Year
INCREMENTAL INITIAL INVESTMENT COSTS
Purchased Equipment (Purchase. Tax, Delivery)
Utfty Connections/Systems
PSanntna-'Engtoeering (Labor, Materials)
Site Preparation (Labor, Materials)
Constructfonflnstalation (Labor, Materials)
Sttrt-up/rraWng (Labor, Materials)
Permttog
Buidings & Land
Working Capital
Contingency
Other
Other
Other
Other
Total Initial Investment Costs
INCREMENTAL ANNUAL OPERATING (COSTS)/SAVINGS
Direct Material* (Purchase, Delivery, Storage)
UMes
Direct Labor (Wage/Salary. Benefits)
Waste Management (Labor, Materials)
Regulatory Compiance (Labor, Materials) #1
Regulatory Compliance (Labor, Materials) #2
Product Quality (Labor, Materials)
Revenues - Product
Revenues - By-product
Insurance
Future UabSty
Other
Other
Other
Total Annual Operating (Costsysavlngs
INCREMENTAL TAX CALCULATION
Annual Operating (CostsySavings
- Depredation
• Expensed Initial Investment Costs
+ Taxable Gain (Lou) on Salvaged Equipment
Taxable Income
Income Tax at 41.9%
INCREMENTAL CASH FLOW
Annual Operating (CostsySavings
-Income Tax
- Initial Investment Costs
+ Recovery Of Working Capital
+ S*ly»goVakie
After-Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
9/1/96
0
$0
0
0
0
0
0
0
0
0
0
0
0
0
0
$0
0
$0
0
$0
Cash Flow-AII2 v. Base-pa. 1
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
SO
so
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
so
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
so
so
0
0
0
0
0
0
0
0
0
0
0
0
0
so
so
0
0
0
$0
so
0
0
0
0
0
$0
0
so
4
so
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
so
$0
0
0
0
$0
$0
0
0
0
0
0
$0
0
$0
5
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
50
0
0
0
$0
$0
0
0
0
0
0
$0
0
so
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
so
0
0
0
so
$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
so
$0
I
I
I
$0
so
0
0
0
0
0
$0
0
$0
-------
1 INCREMENTAL CASH FLOW ANALYSIS
Alternative Scenario 2 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-upn"raining (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 (CostsJ/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
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
Cash FIOW-AI12
8
SO
0
0
0
0
0
0
0
0
0
0
0
0
0.
SO
SO
0
0
0
0
0
b
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
50
0
0
0
.so
$0
0
0
0
0
0
$0
0
$0
10
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
so
$0
0
0
0
so
$0
0
0
0
0
0
$0
0
so
11
so
0
0
0
0
0
0
0
0
0
0
0
0
0
so
so
0
0
0
0
0
0
0
0
0
0
0
0
0
so
so
0
0
0
$0
so
0
0
0
0
0
$0
0
so
12
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
so
so
0
0
0
so
so
0
0
0
0
0
$0
0
$0
13
so
0
0
0
0
0
0
0
0
0
0
0
0
0
so
so
0
0
0
0
0
0
0
0
0
0
0
0
0
so
$0
0
0
0
•$o
$0
0
0
0
0
0
$0
0
$0
14
so
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
so
0
0
0
so
$0
0
0
0
0
0
$0
0
so
v. Base-pa.2
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
so
$0
0
0
0
0
0
$0
0
$0
-------
INCREMENTAL PROFITABILITY ANALYSIS
Analysis Name: Blank Spreadsheet 9/1/96
Profit-pg1
P2/FINANCE calculates three indicators of profitability. (See on-line help for more detailed descriptions.)
Net Present Value (NPV), the most reliable indicator, is the value in today's dollars of the discounted future
savings of a project. A positive NPV indicates a profitable project. When considering multiple projects, the
most profitable project has the highest NPV.
Internal Rate of Return (IRR) is the Discount Rate for which the NPV of a project would equal zero. An IRR
greater than the Discount Rate indicates a profitable project. When considering multiple projects, the most
profitable project usually, but not always, has the highest IRR. IRR cannot be calculated for some projects
with irregular cash flows.
Discounted Payback is the time period within which the discounted future savings of a project repay the Initial
Investment Costs. A shorter payback period often, but not always, indicates a more profitable project because
Discounted Payback does not account for cash flows that occur after the payback period. Discounted
Payback cannot be calculated for some projects.
P2/FINANCE provides four time horizons for calculating Net Present Value and Internal Rate of Return.
P2/F1NANCE automatically calculates the profitability over 5, 10, and 15 years. You may choose an optional
fourth time horizon between 1 and 15 years.
Optional Time Horizon | ; •:• :-:.:''|.;:-:':^i'13i;]
This analysis calculates the incremental profitability of each Alternative Scenario relative to the Base Scenario.
Base Scenario: Base Scenario Name
Net Present Value ($)
Scenario
Name
Years 0-5 Years 0-10 Years 0-15 Years 0-13
Alternative Scenario 1
Alternative Scenario 2
Alternative Scenario 1 Name #N/A #N/A #N/A #N/A
Alternative Scenario 2 Name #N/A #N/A #N/A #N/A
Internal Rate of Return (%)
Scenario
Name
Years 0-5 Years 0-10 Years 0-15 Years 0-13
Alternative Scenario 1
Alternative Scenario 2
Alternative Scenario 1 Name #N/A #N/A #N/A #N/A
Alternative Scenario 2 Name #N/A #N/A #N/A #N/A
Discounted Payback (years)
Scenario
Name
Payback
Alternative Scenario 1
Alternative Scenario 2
Alternative Scenario 1 Name #N/A
Alternative Scenario 2 Name #N/A
-------
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
B-l
-------
P2/FINANCE Version 3.0
Appendices
Start-up/Training (Labor, Materials)
In-house
Trials/Manufacturing Variances
Process/Equipment Training
Safety/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
B-2
-------
P2/FINANCE Version 3.0
Appendices
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
B-3
-------
P2/FINANCE Version 3.0
Appendices
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
B-4
-------
P2/FINANCE Version 3.0
Appendices
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.
C-l
-------
P2/FINANCE Version 3.0
Appendices
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 compared 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.
C-2
-------
P2/FINANCE Version 3.0
Appendices
NPV = CF,
1+k
(1+k)
(1+k)"
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 hi 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;
C-3
-------
P2/FINANCE Version 3.0
Appendices
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.
C-4
------- |