United States Pollution, Prevention And EPA 742-B-94-003
Environmental Protection Toxic Substances January 1994
Agency (7409)
&EPA P2/Finance
User's Manual
Pollution Prevention Financial
Analysis And Cost Evaluation
System For Lotus 1 -2-3 For
DOS, Version 3.4a
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P2/F1NANCE USER'S MANUAL
Pollution Prevention Financial Analysis and Cost Evaluation System
for Lotus 1-2-3 for DOS, Version 3.4a
Tellus Institute
11 Arlington Street
Boston, MA 02116-3411
Tel: (617) 266-5400
FAX: (617) 266-8303
Version 2.0: Copyright (c) 1993 - Tellus Institute, Boston, MA, USA.
All rights reserved. No part of this publication or associated software may be reproduced,
stored in a retrieval system, or transmitted in any form or by any means, without the prior
written permission of the publisher.
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LICENSING AGREEMENT AND DISCLAIMER
LICENSE AGREEMENT FOR P2/FINANCE
P2.FINANCE, including the software disk and User's Manual, is proprietary and copyright by
Tellus Institute, Boston, MA, USA. It is provided by EPA as a service to government
organizations for purposes of facilitating the financial analysis of pollution prevention projects.
P2.FINANCE may be reproduced only for use within the recipient's organization.
Reproduction, transfer and/or distribution of P2/FINANCE in any form whatsoever outside the
recipient's organization is strictly prohibited.
WHERE TO GET P2. FINANCE SOFTWARE
Federal, State, and Local Government Employees
The P2. FINANCE software is available to all federal, state and local government employees
free of charge from the Environmental Protection Agency, Pollution Prevention Information
Clearinghouse(phone:(202)260-1023, fax:(202)260-0178), MC 3404, 401 M St. S.W.,
Washington, D.C., 20464.
Others
AH others interested in obtaining copies of the software and/or the software manual should
contact the Tellus Institute, (phone:(617)266-5400, fax:(617)266- 8303), 11 Arlington Street,
Boston, MA 02116-3411.
USER SUPPORT HOTLINE
A technical support hotline is available from the Tellus Institute at no charge to users. The
hotline number is (617)266-5400 and is answered from 9:00 A.M. to 5:00 P.M.. Please report
any technical difficulties with the software directly to Tellus Institute at the above address.
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P2/FINANCE USER'S MANUAL
TABLE OF CONTENTS
1.0 Introduction 1
2.0 Hardware and Software Requirements 1
3.0 Starting Up 1
4.0 Stepping through P2/FINANCE 2
4.1 Layout of P2/FINANCE 2
4.2 Screen and data formats 4
4.3 Data entry
Step 1: Title Page 5
Step 2: Capital Costs 5
Step 3: Operating Costs 6
Step 4: Capital and Operating Costs Review,
Financial Parameters, Liability 8
Step 5: Cash Flows and Profitability Analysis 10
Step 6: Printing a Worksheet 11
4.3 Saving the worksheet file 12
Appendix A: List of Potential Costs A-l
Appendix B: Blank Worksheet File B-l
Appendix C: TCA at work: A Case Study in the Pulp and Paper Industry C-l
Appendix D: Glossary of Financial Terms D-l
Appendix E: P2/FINANCE Assumptions E-l
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P2/FINANCE USER'S MANUAL
Pollution Prevention Flnandai Analysis and Cost Evaluation System
1.0 Introduction
P2/FINANCE is designed to simplify and quicken the task of organizing and analyzing cost
data, calculating annual cash flows, and generating financial indicators for pollution prevention
investments. P2/FINANCE is highly flexible and can be used for both small and large projects
for which there are few or many cost items which need to be considered. The program
accommodates numerous categories of costs and savings in a disaggregated fashion to assist
the user in identifying and organizing relevant data for the analysis.
P2/FINANCE calculates and reports Simple Payback, Net Present Value (NPV), and Internal
Rate of Return (IRR) for purposes of project screening and sensitivity analysis. Since some of
the benefits of pollution prevention (i.e. liability avoidance, avoidance of capital costs for
pollution control, increased revenue from improved product image, etc.) occur in years after
the project is implemented, P2/FTNANCE computes cash flows and financial indicators over a
IS year time horizon (i.e. IS years after the initial investment).
This manual assumes familiarity with financial concepts, the use of personal computers, the
purpose and use of spreadsheets, and the Lotus 1-2-3 software package. Financial calculations
are described in the main text of this manual only as necessary to implement entry of data into
the worksheet. More comprehensive descriptions of the financial terminology, assumptions,
and methods used are found in Appendices D and E.
2.0 Hardware and Software Requirements
P2/FTNANCE is a user-friendly, customized worksheet file developed with Lotus 1-2-3 Version
3.4a for DOS and can be run on an IBM-PC, XT, AT or compatible microcomputer which is
equipped with the Lotus 1-2-3 software version 3.1 or higher.1 A color monitor, though not
required, will facilitate data entry.
3.0 Starting Up
There are two files on the system diskette. The P2/FTNANCE worksheet file, called
P2FINAN.WK3, is an "empty template" which must be copied for each project analysis. The
second, P2FINAN.FM3, is a file containing the format specifications for P2FINAN.WK3.
FIRST TIME USERS: Copy the P2FINAN.WK3 file onto another diskette or onto the hard
drive of the computer. When copying in Lotus 1-2-3, P2FINAN.FM3 will be duplicated
automatically when P2FINAN. WK3 is copied. When copying in DOS, it will be necessary to
copy each file separately. Use these duplicate files for project analysis, keeping the master
disk to generate later copies if necessary.
This system is also available in Microsoft Excel for Windows version 4.0.
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When you are ready to enter data into the worksheets, make copies of the P2FINAN.WK3 file
(and P2FINAN.FM3 file if in DOS) under a new name, preferably one that reflects the project
that you are analyzing. Note that the extension .WK3 may not be changed. If copying in DOS,
the corresponding format file must have the same name and the .FM3 extension. One
worksheet file pair is used per analysis.
4.0 Stepping through P2/FINANCE
Before beginning, it may be useful to refer to Appendices A, B, and C. Appendix A contains a
detailed checklist of potential costs and revenues. Appendix B contains a copy of the blank
worksheet file and Appendix C contains a factual case study to familiarize users with the
system without initially having to collect or invent practice data themselves.
4.1 Layout of P2/F1NANCE
P2/FTNANCE is a worksheet file consisting of nine pages in six worksheets. Figure 1 illustrates
the page layout. These instructions will take you through P2/FINANCE in the order in which
the pages and entry fields appear. First, open the file, P2FINAN.WK3. The accompanying
format file, P2FINAN.FM3, will open automatically. The initial screen will appear with a
P2/FINANCE user menu as shown below.
Alt-M Return to Main Menu
Alt-G Access GOTO menu (Go to a worksheet in the worksheet file)
Alt-P Access PRINT menu (Print worksheets)
Alt-S Save the worksheet under the current name
Alt-Z Access ZOOM menu (Change number of rows and columns displayed)
Note: When using any of the above options, it is essential that the user not have a Lotus 1-2-3
menu at the top of the screen. If a Lotus 1-2-3 menu is displayed, remove it by clicking
the mouse pointer on the worksheet. If you happen to utilize any P2/FINANCE user
menu while a Lotus 1-2-3 menu is displayed, you will hear a beep and the screen may
flash. Press escape until there are no menus displayed at the top of the screen.
• Alt-M allows the user to return to the above menu from any worksheet in the worksheet
file.
• Pressing Alt-G yields a menu of the six worksheets contained in the F2/FINANCE
worksheet file:
Title_Page Accesses Page 1. a title page which includes fields for the date,
project title, preparer's name, organization, and comments.
Capital Accesses Pages 2 and 3. user-entered capital cost data for the
project.
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Figure 1. Worksheet and Page Layout in the P2/FINANCE Worksheet File.
6
Flfteegvr
5
Summary
4
Operating
Capital
1
Title_Page
9
Proflt_Anal
8
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Operating Accesses Page 4. user-entered operating cost data.
Summary Accesses Page 5. a summary of the capital and operating cost
data automatically calculated from pages 1-3, and several user-
entered financial parameters.
Fifteen_yr Accesses Pages 6 through 8. a report of annual cash flows for
fifteen years automatically calculated from data on page 5.
Profit_Anal Accesses Page 9. a profitability analysis using financial indicators
based on data from pages 6-8.
Except where noted, page numbers refer to pages in the worksheet file as listed above, not
pages Of this manual
Worksheets can be accessed in any order. Once a worksheet of interest has been accessed as
described above, data may be entered into one or more pages contained in that worksheet. To
access the additional pages in a worksheet which contains more than one page, it will be
necessary to scroll down or across the screen. For example, to access page 3 in the Capital
worksheet, scroll down from page 2. Similarly, in the Summary worksheet, to reach page 7 or
8 from page 6, scroll to the right. From any worksheet, users may continue to access other
worksheets by pressing Alt-G and selecting the desired option, or by pressing Ctrl_PgUp and
Ctrl_PgDn, or their Smartlcon equivalents.
• Alt-P is described in section 4.2, Step 6, Printing a Worksheet, and Alt-S is described in
section 4.3, Saving the worksheet file.
• Pressing Alt-Z will yield a menu allowing the user to change the size of the font in which
the worksheets are displayed. It will not, however, affect printed copies.
4.2 Screen and data formats
P2/FINANCE contains many entries for capital, operating, and future liability costs and
savings. On color monitors, all text and data entry cells are highlighted in yellow. On .black
and white monitors, and on all printed copies, the cells which allow text and data entry are
shown as outlined boxes. Cells which are not highlighted in yellow (or are not boxed) are
"locked" and do not allow text or data entry. If the user attempts to enter data into or
otherwise edit any locked cells, the message "Protected cell-Press Fl (HELP)," will appear on
the bottom left comer of the screen. The user can press Fl if an explanation is desired, or
press the ESC key to delete the message and proceed with data entry into yellow (or boxed)
cells.
Cost entries which are not relevant to the project may be left blank. Costs may also be
summed manually and then entered into the worksheets in an aggregate form, if desired.
However, data cannot be entered into Total columns.
Text which appears in bright green or yellow cells at the top of data entry pages on the screen
are data entry and formatting reminders.
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As formatted, the worksheets can handle positive or negative numbers (entered or calculated)
of up to IS digits on the Operating Costs page, and up to 10 digits on other pages. If numbers
with more digits are entered or calculated, error symbols (****) will appear in some cells in
the worksheets. To denote a negative number, a minus sign or parentheses should be used.
Lotos 1-2-3 will denote negative numbers with parentheses. Dollar signs and commas will be
added automatically where appropriate.
P2/FINANCE performs many functions and calculations automatically When this occurs, a
description of the function is given, in italics, below the instruction note in this manual.
4.3 Data Entry
Step 1 - Entering the Title Page Information Title Page Worksheet, Page 1
The title page contains entry fields for the date, project title, preparer's name, organization's
name, and comments. The date format to be used is month/day/year, e.g. 12/01/92. The
default name "Blank Worksheet file" should be replaced with the appropriate project name.
P2/FINANCE automatically will copy the project name and date on the top of pages 2-9.
The remaining yellow-highlighted (boxed) fields can be filled as desired.
Step 2 - Entering Capital Cost Data Capital Worksheet, Pages 2 and 3
Capital costs are one time costs for the project, which include: equipment, construction
materials, site preparation, installation; engineering, start-up/training, permitting, etc. Pages 2
and 3 of P2/FTNANCE contain entry fields for many capital cost items. On page 2, enter brief
descriptions of Purchased Equipment needed for the project in the first column and the price
of the equipment in the corresponding row of the Costs column.
P2/FINANCE automatically will calculate total costs for Purchased Equipment and enter
the total in the Totals column in the Purchased Equipment section.
A number or letter code can be entered in the Ref. column to refer to back-up documentation
for the project analysis. The number 1, for example, can be entered into the Ref. column to
refer to an attached cost estimate from an equipment vendor for a piece of equipment listed in
the first column of the same row. Also, the user can enter information or reminders in the
Notes column to indicate, for example, that tax is included in purchased equipment price or
that the sales tax figure is based upon a 5% tax rate.
Enter cost estimates for all other capital costs for Materials, Utility Connections and New
Utility Systems, Site Preparation, Construction/Installation, Engineering/Contractor, Start-
up/Training, Contingency, Permitting, Initial Charge for Catalysts and Chemicals, Working
Capital, and Salvage Value in the spaces provided on pages 2 and 3 of the worksheet file. All
of the capital cost categories, such as Purchased Equipment, provide blank lines to allow the
user to customize subcategories for each project. In addition, the user should feel free to
overwrite the default subcategones shown in yellow cells with those appropriate for the project.
It is not possible, however, to add lines. In the event that there are not enough spaces for
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relevant cost items, it is suggested that the user aggregate some cost items manually before
entering data into the worksheet.
P2/F7NANCE automatically will calculate total costs far each cost category and enter the
results in the column marked Totals.
All capital cost items except Working Capital and Salvage Value are depreciated for tax
purposes in the cash flow and financial indices calculations on pages 6 through 9. Working
Capital is treated as a one-time expense at the beginning of the project and both Working
Capital and Salvage Value are treated as one-time revenues later in the project life. Because
Working Capital is cashed in as a revenue at the end of the project operating period, the sum
of the values entered for Working Capital on page 3 is automatically adjusted for inflation for
the year in which it is cashed out. The Salvage Value entered is used for depreciation
calculations and is not adjusted for inflation; the entries for Salvage Value on page 3 should
therefore be an estimate of the actual future salvage value in the final depreciation year.
Note: In some cases, an investment in pollution prevention may allow avoidance of a capital
expenditure in the future for a new pollution control device, retrofit of an existing
device, waste handling, or a storage system. The financial analysis of the pollution
prevention investment should include savings associated with any avoided future capital
expenditure. Step 5 on page 10 of this manual provides instructions for inclusion of
such savings in the analysis.
Step 3 - Entering Operating Cost Data Operating Worksheet, Page 4
Operating costs and savings occur each year after the investment for the life of the investment.
They include the costs of raw materials, waste management, utilities, labor, regulatory
compliance, and others. To compute cash flows and financial indicators it is necessary to
calculate the net annual operating cost for the project, in other words, the difference between
the annual operating cost .for the current process and the annual operating cost for the
alternative process. This difference is the change in annual costs that will result from the
project under consideration. Therefore, it is important to remember that you do not need to
estimate operating costs that remain the same (e.g if the project will not affect labor costs, it
is not necessary to estimate and include labor costs for the current and alternative processes).
Operating costs, savings, and revenues are entered into page 4, Operating Costs. Cost
categories, such as Direct Materials, Waste Management, Utilities, Direct Labor, Other,
Regulatory Compliance, Insurance, and Revenues are provided to help organize and
summarize data for subsequent financial calculations. The placement of specific cost and
revenue numbers in categories is flexible. As with capital costs, the user may overwrite the
default subcategories shown in yellow (boxed) cells to provide the appropriate detail for the
project.
P2/FINANCE allows you to enter operating cost data in two ways. Use Method 1 if you
choose to enter operating cost and revenue data for both the current and alternative processes.
Method 2 should be used if you choose to enter only incremental (i.e. an increase or decrease
in) costs, savings, and revenues for the alternative process over the current process.
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Method 1: Entering operating costs, savings, and revenues for both the current and
alternative processes.
Note: Costs (cash outflows') should be entered as positive values and savings/revenues
(cash inflows) should be entered as negative values. Negative values should be
entered with a minus
Starting with the Direct Materials category, enter a brief description of the raw
materials and supplies used in the current process in die Item column and enter their
corresponding annual costs in the Annual Cost column. Do the same for all other
Current Process and Alternative Process cost categories on page 4.
If revenue will be affected by the project because of an expected increase or decrease
in sales, product price (i.e. market value), production rate, or production of a
marketable by-product, enter revenue for the current process and alternative process in
the Revenues - Sale of Product and Revenues • Marketable By-products categories at
the bottom of page 4. Again, note that revenues must be entered as negative numbers.
P2/FINANCE automatically will total the operating costs for the current and alternative
processes and report the Total columns, subtract the category totals of the alternative
process from the current process and report the difference in the right-most column of page
4. which is entitled Difference = (Curr.-Alt.).
Method 2: Entering incremental operating costs, savings, and revenues for the
alternative practice only.
Using Method 2, you will enter numbers only in the Alternative Process Annual Cost
column.
Note: Costs (cash outflows) and decreases in revenue should be entered as positive
values: savings and revenue increases (cash inflows) should be entered as
negative values. Negative values should be entered with a minus sign.
In the Annual Cost column for the Alternative Process, enter estimates of the change
in annual costs or savings in each category, remembering that costs/revenue decreases
for the alternative system should be entered as positive numbers and savings/revenue
increases should be entered as negative numbers.
If revenue will be affected by the project, either because of an expected increase or
decrease in sales, product price (i.e. market value), production rate, or production of a
marketable by-product, enter revenue increases or decreases for the alternative process
in the Revenues - Sale of Product and Revenues - Marketable By-products entries at
the bottom of page 4.
P2/FTNANCE automatically will total the operating costs for the current process
(all zeroes using Method 2) and the alternative process (the incremental changes
entered by the user), and report the Total columns, subtract the category totals of
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the alternative process from the current process and report the difference in the
right-most column of page 4, which is entitled Difference = (Oar.-Alt.).
Liability Estimates Summary Worksheet, Page 5
The Capital and Operating Cost Summary has three functions: 1) to summarize and report
capital and operating cost data, 2) to accept financial parameters for use in the financial
calculations on pages 6 through 8, and 3) to accept estimates of avoided future liability
attributable to the pollution prevention project.
On page 5, user entries are denoted by yellow (boxed) cells containing default values. Enter
numbers in the boxed data entry cells, replacing the default values from the blank worksheet.
Step 4a - Reviewing Capital Cost Data On page 5, the Summary worksheet, you will
see that the left-hand side of the page contains capital cost data. Begin by reviewing
the capital cost summary (Purchased Equipment through Salvage Value) taken from
costs entered on pages 2 and 3 of P2/FINANCE. If these numbers appear incorrect,
recheck the numbers that you entered on pages 2 and 3.
Step 4b - Entering Capital Cost Financial Parameters Equity, % and Debt, %. If the
capital cost of the project will be entirely funded by equity, then enter a 1.0 in the $
column of the Equity, % row to represent 100%.
Note: Entries reported by P2/FINANCE as % (e.g. Equity, %) must be entered as a
decimal number. For example, if equity financing is 50%, then you must enter
the number as 0.5 (not 50). enter 1.0 for 100%, and so on.
If the capital cost will be completely debt-financed (i.e. through loans) enter 0 in the $
column in the Equity, % row. If the project will be funded by a mix of equity and debt,
enter the cell a decimal number which corresponds to the percent funded by equity.
P2/HNANCE automatically will enter a number in the $ column of the Debt, %
row which is the % debt incurred for the project based on the Equity, %, value you
entered.
If the project will be wholly or partially financed by debt, you must enter a decimal
number in the $ column adjacent to Interest Rate on Debt, % and Debt Repayment,
years. If there will be no debt financing, you may leave the default values from the
blank worksheet in these two boxes. Leaving the default values will not affect any
calculations performed by P2/FTNANCE in cases where no debt financing is used.
P2/FINANCE automatically will calculate and report, in dollars, Equity
Investment, Debt Principal, Interest on Debt, and Total Financing in the
corresponding cells of the $ column.
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Depreciation Period, years and Operating Period, years. Enter the depreciation period
for the investment and the operating period for the process into the corresponding cells
in the $ column. The Operating Period, yean is used only to determine when Working
Capital is cashed out; Working Capital is cashed out during the final operating year.
Income Tax Rate, %. Enter a corporate income tax rate as a decimal number into-the
cell in the $ column of the Income Tax Rate, % row. F2/FTNANCE accepts only one tax
rate for the analysis, and applies this rate to all taxable income (i.e. savings) for the
project. You may combine federal and state income tax rates into a single tax rate if
appropriate.
Escalation Rate, %. The escalation, or inflation rate, will be used to inflate operating
costs, working capital, and future liability estimates over the project lifetime.
P2/FTNANCE accepts only one inflation rate which is used for all annually recurring
costs and savings. Enter the escalation rate as a decimal number in the $ column in
the yellow (boxed) cell below Income Tax Rate, %.
Cost of Capital, %. Cost of capital, or discount rate, is used to calculate discounted
cash flow and Net Present Value. Enter a decimal number in the corresponding cell in
the $ column.
Step 4c - Reviewing Operating Cost Data The right-hand section of page 5 contains
operating cost data for the project. Notice that operating costs are summarized and
reported by category: Direct Materials through Insurance, Revenues - Sale of Product
and Revenues - Marketable By-Products. If you used Method 1 to enter operating
costs, then costs will be reported in the Current, Alternative, and Difference columns.
If you used Method 2, costs will be reported in the Alternative and Difference columns
only.
This page provides you with the opportunity to add Maintenance, Overhead, and Labor
Burden costs if these items are not already included in the operating cost estimates
entered on Page 4. Most of these numbers are calculated by P2/FTNANCE as a
percentage of Capital costs or as a percentage of Total Labor costs, with the
percentages entered by the user. If you choose to add these costs, enter one or more
decimal values in the appropriate yellow (boxed) cell. If you choose not to add these
costs on this page, be sure to enter zeroes for the percentage values in the boxes. For
Current Maintenance costs, the costs are not calculated as percentage of capital, and
should be entered directly into the yellow (boxed) cells in the Current column of the
Labor, % and Materials, % rows.
P2/F7NANCE automatically will calculate and enter dollar estimates for
Maintenance, in the Alternative, and Difference columns. For Overhead, and
Labor Burden, P2/FINANCE will automatically calculate and enter the values in
the Current, Alternative, and Difference columns. P2/FINANCE will then
determine the Total recurring annual cost for the current process, the alternative
process, and the difference between the two. The difference represents the annual
savings or cost for the project.
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Step 4d - Entering Estj™^* of Avoided Future Liabiliw Costs By implementing a
pollution prevention project, you may avoid future liability costs associated with fines
and penalties, personal injury, or property damage. These are costs beyond those
covered by insurance policies. You may include avoided liability estimates for up to 4
different years of the investment, by entering the year (i.e. year 1, year 2) in which you
might expect the liability cost to be incurred in the Year Expected column and the
corresponding avoided liability estimates in the Cost (Curr.-Alt.) column. The liability
estimates entered should be in current (year zero) dollars as they will be automatically
adjusted for inflation for the year in which they occur. A space for documentation
reference numbers is provided in the Rcf. column.
Note: Avoided liability cost estimates should be entered as positive values.
If, for example, the company has incurred a fine of $25,000 once every four years for
an exceedance of an effluent standard and you expect that the pollution prevention
project will eliminate these fines, you may enter $25,000 for years 4, 8, and 12 of the
investment. Or if the pollution prevention project will eliminate a wastestream, and
you estimate that the wastestream could cause a liability of $500,000 in year 10 of the
investment for remedial work at a disposal site, you may enter the $500,000 and 10 into
the cells the first row of the Cost (Curr.-Alt.) and Year Expected columns, respectively.
P2/FTNANCE will automatically copy Cost values entered under Future Liability
into the appropriate cells in the Liability row on pages 6 through 8.
Step 5 - Reviewing the Cash Flows/Profitability Analysis of the Project Fifteen_yr Worksheet,
Pages 6-8 and Profit_Anal Worksheet, Page 9
Pages 6, 7 and 8 calculate and report the cash flows of the project. The cash flow analysis is
carried out over a 15 year period following the initial investment. Cash flow for years 1-5 is
reported on page 6, years 6-10 on page 7, and years 11-15 on page 8.
Note: As discussed in Step 2, it is possible to include an avoided capital cost estimate into the
analysis. This cost must be entered directly into the report on page 6, 7 or 8. Simply
enter the estimate, as a negative number, into the Investment row of the Capital
Costs($) section in the column of the Operating Year in which you would have
expected the cost to be incurred (i.e. 0-15). If the cost estimate is in current year (i.e.
today's) dollars, multiply the estimate by the Escalation Factor (top of page, under
Operating Year) for that year before entering the number. For example, if you expect
to avoid $150,000 (current year dollars) in capital expenditures in the fourth year after
the investment, enter - 182400, which was calculated from -150,000* 1.216, in the
Investment row of the Operating Year 4 column.
A Profitability Analysis Summary is contained on page 9. It lists financial indicators of the
investment including:
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II
Net Present Value (NPV)
Years 1-5
Years 1-10
Years 1-15
Year 1-Year of Choice
.Internal Rate of Return (IRR)
Years 1-5
Years 1-10
Years 1-15
Year 1-Year of Choice
Simple Payback
In order to calculate the financial indicators for your Year of Choice, it is necessary to enter
the selected year in the small yellow user entry cell, which is inside the summary box at the
bottom of page 9.
P2/F7NANCE automatically will calculate and report, in dollars. Net Present Value
(NPV), Internal Kate of Return (IRR), and Simple Payback for your Tear of
Ounce in the designated cells in the table.
Step 6 - Printing a Worksheet
A print macro file is contained within the P2F1NAN. WK3 file to simplify the printing of pages
1-9. The printer configuration is set 10 HP LaserJet 4, output device LPTI, lower tray. To
change these settings, consult your Lotus 1-2-3 user's manual. To print the desired page(s)
press Alt-P to access the print menu and select the desired worksheet(s):
Title_Page Title Page, page I
Capital Capital Costs, pages 2 and 3
Operating Operating Costs, page 4
Summary Cost Summary, page 5
Fifteen_vr Cash Flows, pages 6-8
Profit_Anal Profitability Analysis, page 9
All pages 1-9
The report will be printed in black and white using a Swiss 6 point font. Boxes which appear
yellow on the screen will be appear white and boxed on the printed report. Experienced Lotus
1-2-3 users can set their own print areas and use the "Print" option from the Lotus 1-2-3 menu
instead of using the print macro, if desired.
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12
4.3 Saving the worksheet file
Pressing Alt-S will automatically save the file with its current name. If, after making changes
to the worksheet file, you want to avoid copying over your original file, you must use the
File/Save options under the Lotus 1-2-3 menu to enter a new name for the file.
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13
APPENDIX A
LIST OF POTENTIAL COSTS
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14
UST OF POTENTIAL COSTS
CAPITAL COSTS
P2FINANCE List
Additions! Items/Examples
Purchased Equipment
Equipment
Delivery
Sales tax
Price for Initial Spare Parts
Process Equipment
Monitoring Equipment
Preparedness/Protective Equipment
Safety Equipment
Storage & Materials Handling Equipment
Laboratory/Analytical Equipment
Insurance
Materials
Piping
Electrical
Instruments
Structural
Insulation
Utility Connections and New Utility Systems
Electricity
Steam
Water
Sewerage
Refrigeration
Fuel
Plant Air
Inert Gas
Site Preparation
Demolit'on and Clearing
Old Equipment/Rubbish Disposal
Construction/Installation
In-house
Contractor
Vendor
Engineering/Contractor
In-house Planning
In-house Engineering
Procurement
Contractor/Consultant
Start-up/T raining
In-house
Vendor/Contractor
Tnals/Manufacturmg Vanances
Training
Building Construction Materials
Painting Materials
Ducting Materials
General Plumbing
Cooling Water
Process Water
Gas Connection
Oil Connection
Wslkwsys roads, and fencing
Grading. Landscaping
Labor
Supervision
Taxes
Insurance
Equipment Rental
Design
Drafting
Accounting
Supervision
Contingency
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15
UST OF POTENTIAL COSTS
CAPITAL COSTS
P2FINANCE List Additional Kerns/Examples
Permitting
Fees Labor
In-house Supervision
Contractor/Consultant Environmental Impact Studies
Initial Charge for Catalysts and Chemicals
Working Capital
Raw Materials
Materials and Supplies
Product Inventory
Salvage Value
-------
16
UST OF POTENTIAL COSTS
OPERATING COSTS
PZRNANCEUst
Direct Materials
Waste Management (Materials & Labor)
Pre-Treatment
On-site Handling
Storage
Treatment
Hauling
Insurance
Disposal
Utilities
Etectricrty
Steam
Water
Sewerage
Direct Labor
Other
Additional Items/Example
Raw Materials
Catalysts and Solvents
Wasted Raw Materials Costs
Transport
Storage
Water (Cooling or Process)
Refrigeration
Fuel (Gas or Oil)
Plant Air and Inert Gas
Operating Labor/Supervision
Manufacturing Clerical Labor
Inspection (QA/QC)
Worker Productivity Changes
Miscellaneous Indirect Labor
Maintenance (Materials & Labor)
Medical Surveillance
Regulatory Compliance (Matenals & Labor)
Manifesting
Reporting
Monitoring
Testing
Labeling
Permitting
Training
Insurance
Revenues
Sale of Product
Marketable By-products
Future Liability
Re-perm fling
Right-to-Know Training
Recordkeepmg
Inspection
Closure/Postdosure Care
Generator Fees/Taxes
Manufaetunng Throughput Change
Change in Sales from-
Market Share
'Corporate Image
Fines/Penalties
Personal Injury
Real Property Damage
Natural Resource Damage
-------
17
APPENDIX B
BLANK SPREADSHEET
-------
18
10/25/93 Pagel
PROJECT TITLE: Blank Worksheet Rle
PREPARED BY:
ORGANIZATION:
COMMENTS:
P2/FINANCE
Pollution Prevention Financial Analysis
and Cost Evaluation System
Version 2.0
Copyright 1993
Tellus Institute
Boston, MA
-------
19
PROJECT TITLE: CAPITAL COSTS 10/25/83
Blank Worksheet File
Mate
Utility
SrteF
Cons
Engir
Delivery
Sales tax
Price tor Initial Spare Parts
rials
Piping
Electrical
Instruments
Structural
Insulation
Connections and New Utility Systems
Electricity
Steam
Water
nefmmiiiliin
Fuel (Gas or Oil)
Plant Air
Inert Gas
'reparation
Demolition and Clearing
Old Equipment/Rubbish Disposal
truction/lnstallation
In— house
Contractor
Vendor
wenng/Contraetpr (In -house & Outside)
In-house Planning
In— house Engineering !
Procurement
Contractor/Consultant 1
SO
SO
SO
so
so
so
Page 2
-
*
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20
PROJECT TITLE:
Blank Worksheet File
CAPITAL COSTS
10/25/83
aLfig
m«. i HOME
rage 3
Start-up/Training
In— house
Vendor/Contractor
Tnals/Manutacturmg Variances
Training i
SO
-
•
Contingency
Fees
In-house
Contraetor/Coniultont
SO
Initial Charge far Catalysts and Chemicals
SO
Working Capital
Raw Materials
Materials and Supplies
Product Inventory
SO
Salvage Value
SO
-------
21
PROJECT TITLE:
Blank Worksheet File
OPERATING COSTS
10/25/93
Page 4
Enter costs •« oosHhre values: Enter savings/revenues as negative values
Annual cost
Mam rt/veart Total
Direct Materials
so
Waste Management (materials ft labor)
Pro— trofitniBnt
On— site Handling
Storage
Trofltment
Hauling
Insurance
Disposal
$0
Utilities
Electricity
Steam
Water
Sewerage
so
Direct Labor
so
Other
SO
Regulatory Ccmpii&nee (materieis & labor)
Manifesting
Reporting
Monitoring
1 Testing .
Labeling
Permitting
Training
so
Insurance
SO
Revenues - Sale of Product
SO
Revenues — Marketable By— products
so
Total SO
Annual Cost
Hem ($/vear) Total
Direct Materials
Waste Management (materials ft labor)
Pre— tresliiMiil
On-site Handling
Storage
Treatment
Hauling
Insurance
Disposal
Utilities
Electricity
Steam
Water
Sewerage
Direct Labor
Oilier
Renulfftnry Compliance (materials ft labor)
M anifcsting
Reporting
Monitoring
Testing
Labeling
Permitting
Training
Insurance
Revenues — Sale of Product
Revenues — Marketable By— products
SO
SO
SO
SO
SO
SO
SO
SO
SO
Total SO
Difference
a(Curr.-AIL)
SO
SO
SO
SO
so
so
so
so
so
so
-------
22
PROJEui IIILE:
Blank Worksheet Rle
10/25/93
PaoeS
CAPITAL AND OPERATING COST SUMMARY
Capital Costs
Purchased Equipment
Materate
Utility Connections
Site Preparation
Installation
Engineering/Contactor
Start-up/Training
Permitting
Initial Catalysts/Chemicals
Depreciable Capital
Working Capital
Subtotal
Debt Interest (Installation)
Total Capital Requirement
Salvage Value
Equity. %
Debt%
Interest Rate on Debt. %
Debt Repayment years
Equity Investment
Debt Principal
Interest on Debt
Total Financing
Depreciation Period, years
Operating Period, years
Income Tax Rate. %
Escalation Rate. %
Cost of Capital. %
(Discount Rate)
S
SO
so
$0
so
so
so
so
so
$0
so
so
so
so
so
so
so
100%
0%
12%
5
so
so
so
so
7
15
39%
5.0%
15.00%
Operating Costs
Waste Management
Utilities
Direct Labor
Other
Regulatory Comphance
Insurance
Maintenance, % Capital
Labor. %
Materals. %
Overhead. % Total Labor
Labor Button
% of Total Labor
Revenues - Sale of Product
Revenues - Marketable
By -Products
TOTAL
Future Liability
(Year expected
= 1.2.3.etc.)
Difference
Current Alternative (Curr -Aft.)
3%
3%
30%
28%
Ref
SO
SO
SO
SO
SO
SO
SO
SO
SO
$0
SO
SO
SO
so
Year Expected
SO
SO
SO
$0
SO
SO
SO
$0
SO
SO
$0
so
so
so
so
so
so
so
so
so
so
so
so
so
so
so
so
so
Cost
(Curr -Alt)
-------
23
rnujcbi IIILC:
Blank WorkshMt File
10/25/93
CASH FLOW ANALYSIS
operating Year
B«M»»l»*4*w» Ea*Mtw
REVENUES($)
Revenue - Sale of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COSTSSAVINGS0)
Direct Materials
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Tot&l Opening Costs
CAPITAL COSTSm
InvostfiMfit
Book Value
^— •* -•••iiialiMBB Aiif t*t>Ainht InAl
Tax DepreciBBOn (oy straignt— ino/
Tax Depreciation (by Double DB)
Tax Depreeiaton (by DDB switching to SL)
Debt Balance
Interest Payment at : 1 2.0%
Principal Repayment
CASH FLOW(S)
HOVBRUtS
+ Operating (Cocts)/Savings
Operating Cash Flow (BIT)
- Interest on Debt
Taxaole Income
< - Income Tax at: 39.0%
Net Income
+ Depreeiabon (DDB7SL)
-Debt Principle Repayment
•__.__*____• ft AB« n*th41
~inV0»llll0lll> (U0BB IVOOIJ
(+ or -) Working Capital
+ Salvage Value
After-Tax Cash Flow
Cumulative CMh How
' Di«-*»untod C"«h Flow
1.000 1.050
0
0'
0
0
0
0
0
0
0
0
0
0
0
0
0
Ol I
0 0
0
0
0 0
0
0
0
0
0
Q
0
c
0
0
0
0
Oft
w
0 0
0
0 0
0 0
0 0
1.103
0
0
0.
0
0
0
0
0
0
0
0
0
0
0
0
I
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
A
' U
0
0
0
0
o
3
1.158
0
0
0
0
0
I
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
o
Paoefl
1216
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
o
5
1.276
0
0
0
0
0
0
0
0
0
0
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
-------
24
PHOJEC i 111 LE:
Blank WoffcalMtt FU0
10/25/93
Paoe?
CASH FLOW ANALYSIS
Operating Temr
P^a*nllltam FalCftaY
REVENUES($)
Revenue - Sale of Product
Revenue - Marketable By- products
Annual Revenue
OPERATING COST/SAVINGS(S)
uireci muenflu
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operatng Costs
CAPrTAL COST5($)
InvcEtiTwnt
Book Value
Tax Depreciation (by Straight-lne)
Tax Depreciation (by Double DB)
Tax Depreciation (by DDB twitching to SL)
Debt Balance
Interest Payment at 1 2.0%
Principal Repayment
CASH FLOW(S)
Revenues
+ Operating (Costs)/Savmgs
Operating Cash Flow (BIT)
** -«pAj»iatmMM /nno/ci i
—Depreciation (DDB/SL)
— Interest on Debt
Taxable Income
- Income Tax at 39 0%
Net Income
+ Depreciation pDB/SL)
—Debt Principle Repayment
-Investment (Lees Debt)
(+ or -) Working Capital
•+• Salvage Value
After-Tax Cash How
Cumulatave Cash Flow
Discounted Ca*h Flow
6
1.340
0
0
0
Q
0
0
0
0
0
0
0
0
0
0
0
I I
0
0
0
0
0
0
0
0
0
0
0
0
J
0
0
0
0
0
0
0
0
0
0
7
1.407
0
0
0
o
0
0
0
0
0
0
0
0
0
0
0
I
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
8
1 477
0
.0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
Ci
0
0
0
0
0
0
0
0
0
0
1351
0
0
0
0
0
0
0
0
o
0
0
0
0
0
1
0
0
0
o
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
1.629
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-------
25
rnujebi IIILC:
Blank WorfcmhMt Hto
10/25/93
Pages
CASH FLOW ANALYSIS
Operating tear
REVENUES'*)
Revenue - Sale of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGS(S)
fliBB •! Uat^ltBln
Dtiect Materials
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operabng Costa
CAPITAL COSTS($)
IflVBStflMflt
Book Value
Tax Oepreciatan (by Straight-lne)
Tax Depreeiataon (by Double OB)
Tax Depreciaaon (by DDB switching to SL)
Debt Balance
Interest Payment at: 12.0%
Principal Repayment
CASH FLOW(S)
Revenues
+ Operating (Costs)/Savings
Operating Cash Flow (BIT)
-Depreciation (DDB/SL)
- Interest on Debt
Taxable Income
- Income Tax at 39.0%
Net Income
+ Depraciabon (DDB/SL)
-Debt Principle Repayment
-Investment (Less Debt)
(+ or -) Working Capital
•••Salvage Value
Alter -Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
1.710
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
I I
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
12
1.796
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
13
1.888
0
0
0
0
0
0
0
0
0
0
0
0
0
0-
0
I
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
14
1*80
0
e
0
6
0
0
0
0
0
0
0
0
0
0
0
0
".
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.
0
0
0
0
0
0
15
2.079
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
c
0
0
0
0
0
0
0
0
0
0
-------
26
PROJECT TITLE:
Blank Worksheet Hie
Page 9
PROFITABILITY ANALYSIS SUMMARY
Net Present Value ($)
Internal Rate of Return
Payback (years)
Years 1-5 Years 1-10 Years 1-15
$0
0%
0.0
$0
0%
$0
0%
Year 1 -Year of Choice
Year of Choice =
Net Present Value ({)
Internal Rate of Return
$0
0%
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27
APPENDIX C
TCA AT WORK: A CASE STUDY IN THE PULP AND PAPER INDUSTRY
Paper Coating Mill
White Water/Fiber Reuse Project
The following cue study illustrates the difference between a company's financial analysis
of a pollution prevention project and a Total Cost Assessment (TCA) of the same project.
The "Company Analysis" is the financial analysis performed independently by the company
to evaluate the profitability of a pollution prevention project. In contrast, the "TCA" is a
more comprehensive financial analysis of the same project, developed collaboratively by the
company and Tellus, to illustrate the differences in profitability when a more comprehensive
approach is used. This case study describes the project under consideration and assesses
both qualitatively and quantitatively the differences in the Company Analysis vs. the TCA.
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28
COATED FINE PAPER MILL
Company Background
A specialty paper mill is part of a larger corporation of pulp, paper, and coating mills.
The mill is not integrated, i.e. does not manufacture pulp. Most of the pulp used by the
mill is purchased via pipeline from a neighboring bleached kraft mill The mill
supplements this pulp with a small amount of purchased market pulp. The mill produces
approximately 190 tons per year of a variety of uncoated, on-machine and off-machine
coated papers, carbonizing, book, and release base paper. The coating used is a latex
(i.e. non-solvent) formulation containing clay, styrene butadiene, starch, and polymers.
Project Background
Papermachine white water, a mixture of water and residual fiber and filler (clay and
calcium carbonate) that drains out of a sheet of paper as it travels across the paper
machine, is typically captured by a white water collection system dedicated to one
papermachine. Some or all white water is usually recycled back into the papermaking
system to recapture water, fiber and filler. In some cases white water is passed through
a saveall screening device to separate fiber and filler from water; fiber, filler and water
are then recycled back into the system. The saveall produces a clear stream of water
that can be used in numerous papermachine operations.
In this mill, two paper machines, sharing a common white water system, produce a
variety of paper grades made with either acid, neutral, or alkaline sizing chemistry.1
Machine 1 has a saveall system that filters fiber and filler prior to discharging into the
joint white water system. This material is recycled back into the papermaking system.
When the machines are using different sizing chemistry, e.g. when Machine 1 is
producing acid-sized paper and Machine 2 is producing alkaline-sized paper, the mixed
white water from both machines is not reusable, and must be sewered. Under these
conditions, a large flow of potentially reusable water from both machines, and fiber and
filler from Machine 2, is lost to the sewer.
Prompted primarily by the lack of spare water effluent pumping capacity and a desire to
better understand the rather complex, old white water piping system, the mill
commissioned a study titled "White Water Recycle Feasibility Study." The study had
1 Sizing is added to pulp to reduce water absorbency in the final paper. The pH (i.e.
acidity or alkalinity) of the pulp must be adjusted according to the type of paper desired and
sizing used.
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29
several objectives: "...to review the design and operation of the mill and recommend
changes that would help reduce peak effluent flows, reduce BOD in the effluent and
reduce total fresh water intake on a mill wide scale". The resulting report contained
•detailed engineering drawings of the fresh water, white water, and paper machine
systems and a recommendation for process modifications.
Project Description
The recommendation made in the feasibility study was the installation of a second
saveall to handle the Whitewater from Machine 2, and the splitting of the Whitewater
systems so that each machine would have a dedicated system. This would permit fiber,
filler and water reuse on both machines at all times, thereby conserving raw materials
and reducing water consumption, wastewater generation, and energy use for fresh and
waste water pumping and freshwater heating. The project would require installation of a
new saveall, a new pump, piping, and controls. Available pulping and stock storage
capacity could be used to pulp separately for each machine.
Project Financial Analysis
The feasibility study also contained a capital estimate for the project of $1,469,404. The
estimate includes: purchased equipment (including saveall, stock chest, clear white water
chest and associated equipment); process control instrumentation; electrical controls and
lighting; a new building for the saveall; piping; installation (in-house and contracted
labor); engineering: and contingency.
Company and TC A Analyses
The Company Analysis consists of the capital estimate, and only those operating costs
and savings that the company typically includes in project financial analyses for projects
of this type. These are:
a. raw material - fiber and filler;
b. energy and chemical use for new equipment;
c. wastewater treatment fees; and
d. changes in labor costs.
The TCA contains these and other relevant operating costs and savings. On the benefit
side, the TCA includes the following:
a. An average reduction in fiber and filler loss of 1,200 tons/year, for a
savings of $421,530/year;
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30
b. A reduction in fresh water usage of 1 million gal/day, and a commensurate
reduction in cost for fresh water treatment and pumping, for a savings of
approximately $112,420/year;
c. A reduction in energy use for fresh water heating amounting to a savings of
approximately $393,400; and
d. A reduction in wastewater generation of approximately 1 million gal/day,
for a savings of approximately $54,750/year in wastewater pumping and
$68,240/year hi wastewater treatment fees.
Annual operating costs are expected to increase iq the following areas:
a. Chemical flocculating agents used in the saveall to promote solids/water
separation will cost approximately $28,700/year;
b. Electric costs for new equipment operation will increase operating costs by
approximately $107,280/year; and
c. An increase hi labor cost of approximately $3,120/year is expected for
operation of new equipment.
The project does not affect wastestreams that require on-site management or disposal,
nor does it affect any regulatory compliance activities at the site; therefore the financial
analysis does not include costs for these activities. In addition, no impacts on revenue
are expected since neither product quality nor production rates will be improved, nor
does the mill expect to visibly enhance its product or company image. Finally, no
tangible impact on avoided future liability is expected for this project.
Table C-l summarizes the cost categories addressed in the Company Analysis and the
TCA for this project, and Table C-2 reports the results of the financial analysis.
Effect of Cost Inclusion on Financial Indicators
As shown in Table C-2, the inclusion in the TCA Analysis of savings associated with
freshwater pumping, treatment, and heating, and waste water pumping dramatically
increases the annual savings and financial indicators above the Company Analysis base
case. These savings, which would typically not be included in the mill's calculation of
profitability, bring the project in line with the mill's 2 year payback rule-of-thumb. By
excluding these savings in the Company Analysis, the project looks reasonably
"profitable" only over the longer time horizon of 15 years.
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31
Table C-l Comparison of Cost Items in Company and TCA Cost Analyses
X = Cost(s) Included
P = Costfs) Partially Included Conmanv TCA
Capital Costs
Purchased Equipment X X
Materials (e.g., Piping. Elec.) X X
Utility Systems X X
Site Preparation X X
Installation Gabor) X X
Engineering/Contractor X X
Contingency X X
Operating Costs
Direct Costs:*
Raw Materials/Supplies P X
Labor X X
Indirect Costs:*
Utilities:
Energy P X
Water X
Sewerage (POTW) X X
* We use the term "direct costs" to mean costs that are typically allocated to a product or process line (i.e.
not charged to an overhead account) and are typically included in project financial analysis. "Indirect costs"
here mean costs that are typically charged to an overhead account and typically not included in project
financial analysis
Table C-2 Summary of Financial Data for the White Water and Fiber Reuse Project
Company Analysis TCA
Total Capital Costs SI.469,404 $1,469,404
Annual Savings (BIT)* $ 350,670 $ 911,240
Financial Indicators
Net Present Value - Years 1-5 ($ 476,408) $ 783,232
Net Present Value - Years 1-10 S 47,240 $2,072.306
Net Present Value - Years 1-15 $ 359.544 $2,849,725
Internal Rate of Return -Years 1-5 1% 37%
Internal Rate of Return -Years 1-10 17% 46%
Internal Rate of Return -Years 1-15 21% 48%
Simple Payback (years) 4.2 1.6
* Annual operating cash flow before interest and taxes
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32
Some uncertainty exists in the wastewater treatment cost estimate. Because the mill
does not have its own wastewater treatment facility, wastewater from the mill is pumped
to a neighboring mill for treatment. In the per ton flow, Total Suspended Solids (TSS)
and Biological Oxygen Demand (BOD) for the subject mill is reportedly higher than the
industry average. The neighboring mill has asked the subject mill to reduce wastewater
flow, although no such measures have been put into effect to date. The treatment
charge is not based on TSS or BOD so the subject mill has no direct economic incentive
to reduce TSS and BOD hi its wastewater. The contract between the mills establishes a
ceiling for wastewater flow, BOD and TSS from the mill Currently, the subject mill is
meeting its flow limit, but is substantially exceeding its contract limits on BOD and TSS.
The treatment contract will be renegotiated hi 1993, but it is not clear whether, or how,
the terms will be changed. However, the mill's environmental engineer speculated that
the charge rate formula might be changed to include a BOD or TSS variable, and that
the overall cost could increase. To test the sensitivity of the project analysis to these
potential changes, the TCA was recalculated twice, doubling and tripling the wastewater
treatment costs. In both cases, the financial indicators change slightly: 50% IRR (years
1-10) and 1.5 payback for double the cost, and 53% (years 1-10) IRR and 1.4 payback
for triple the treatment cost. While there is no dramatic change in projected
profitability, a tripling of wastewater treatment costs, may make this project somewhat
more competitive with other projects competing for capital in a particular budget year.
This may be especially true if the firm applies its rule-of-thumb, 2 year payback criteria
as a screening test for the project.
Detailed reports of the Company Analysis, the TCA, and associated cost calculation
documentation follow.
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33
White Water/Fiber Reuse Project
Costing and Financial Analysis Documentation
A. Capital Costs
Purchased Equipment: $345,985
Saveall and White Water Pump
Materials: $374,822
Piping, Electrical, Instruments and Structural
Installation-
Engineering:
Contingency:
$397,148
$211,046
$140,403
B. Operating Costs
Key: M - thousand
MM -million
CD - gallons/day
Current Process
1. RAW MATERIALS
l.a. Fiber and Filler Loss (includes freight)
Estimated solids loss = 1,500 tons/yr
White water solids =67% fiber, 33% filler
Fiber loss:
1,500tons/yr * 0.67 = 1005 tons/yr
Fiber cost = $44S/ton
Lost fiber cost = 1005 tons/yr * $445/ton =
$447,220/year
Filler loss:
1,500tons/yr * 0.33 = 495 tons/yr
Filler cost = $16I/ton
Lost filler cost = 495 tons/yr * $161/ton =
$79,700/year
White Water and Fiber Reuse
l.b. Fiber and Filler Loss (includes freight)
Estimated recoverable solids = 1,200 tons/year
Estimated solids loss = 1,500- 1.200 = 300 tons/yr
Fiber loss:
300 tons/yr * 0.67 = 201 tons/yr
Fiber cost = $445/ton
Lost fiber cost = 201 tons/yr * $445/ton =
$89,450/year
Filler loss:
300 tons/yr * 0.33 = 99 tons/yr
Filler cost = $161/ton
Lost filler cost = 99 tons/yr * $161/ton =
$15,940/year
-------
34
Current Process
1. RAW MATERIALS (com.)
I.e. Freshwater Treatment
freshwater use = 1.5MMGD
Chemical Costs:
S/MG
Alum 0.025
Sodium aluminaie 0.009
Polymer 0.034
Sodium hypochlorite 0.003
Total $0.071
1.5MMGD *365days/yr *($0.071*1000)/MMG
$38,870/year
White Water and Fiber Reuse
l.d.Freshwater Treatment
0.5MMGD freshwater > = $12,960
I.e. Flocculating Agents for Saveall
Avg. white water flow through saveall = 600 GPM
(864 MGD)
Chemical Costs:
Canonic polymer cost = $O.OS6/Mgal
Anionic polymer cost = S0.035/Meal
total S0.091/Mgal
864MGD * $0.091/Mgal * 365 days/yr =
$28,700/year
2. UTILITIES
2.a. Freshwater Pumping
Annualized freshwater use = 1.5MMGD
2.b. Freshwater Pumping
0.5MMGD freshwater > = $43,250/year
Energy Costs:
S/period' S/MG
Vanable freshwater pumping 133,098 0.234
Miscellaneous 1.479 0.0026
Total $134,577 $0.237
'period = 8 months, 1990
total freshwater use = 566,460 MG
1.5MMGD * 365 days/yr * ($0.237*1000)/MMG =
$129,760/year
-------
35
Current Process
2.UnLinES(cont.)
2.c. Freshwater Heating
1.5MMGD freshwater comes in at 57°F, must be
raised to 9ST
1.5MMGD * 1 Btu/lbT * 8.41b/gal * (95 - 57°F)
= 4.788xl08Btu/day
Fuel cost (No. 6) = $0.39/gal
Fgtiinati»H boiler efficiency = 82.5%
4.788x 108 Btu/day * 1 gal No. 6 fuel/1.4 x 10s Btu
* $0.39/gal * 1/0.825 * 365 days/yr = $590,100/yr
White Water «"d Fiber Reuse
2.d. Freshwater Heating
0.5MMGD freshwater > = $196,700/yr
2.e. Wastewater Pumping
4.0MMGD * 365 days/yr * S150/MMGD
S219,000/yr
2.f. Wastewater Pumping
3.0MMGD > = $164,250/yr
2.g. Wastewater Treatment
Average, annualized wastewater discharge rate
4.0MMGD
Wastewater treatment cost = S187/MMG
4.0MMGD * 365 days/yr * S187/MMG =
$273,020/yr
2.h. Wastewater Treatment
3.0MMGD >= $204,760/yr
2.i. Energy for Equipment Operation
Electricity cost = $0.08/kWh
New Equipment
Drive Pump
Scoop Pump
Pressure Pump
Feed Pump
Recovered Stock Chest Agitator Motor
Recovered Stock Chest Pump
Clear White Water Chest Pump
White Water Surge Pump
Total
_HP_
1
1
40
20
5
25
125
125
342 HP
342 HP * 0.6* 0.746kWh/HP * 8,760hr/yr *
$0.08/kWh = $107,280
-------
36
Current Process
3. LABOR
White Water ™d Fiber Reuse
3.a. Equipment Operation - Saveall
4 hours/week labor
SIS/hour - fully loaded wage rate
4 his/week * 52 weeks/yr * SIS/hr = $3,120/yr
-------
37
COMPANY ANALYSIS
WHITE WATER/FIBER REUSE PROJECT
-------
38
1/1/93
Paget
PROJECT TITLE:
WW/FIBER (Company Analysis)
PREPARED BY:
Risk Analysis Group
ORGANIZATION:
Tellus Institute
COMMENTS:
This spreadsheet incorporates the data from the company's original financial
analysis of the Whitewater/fiber recycle project.
P2/FINANCE
Pollution Prevention Financial Analysis
and Cost Evaluation System
Version 2.0
Copyright 1993
Tellus Institute
Boston, MA
-------
39
PROJECT TITLE:
WW/FIBER (Company Analysis)
MO^P* a boxed cell contARfi UHF ITIout
CAPITAL COSTS 1/i/n
Purd
Mote
utility
SiteF
i Cons
Engir
IwMd Equipment
g ______A PU^a.^ |
EouDinent — Phase II
Delivery
Soles tax
Price for Initial Spare Parts
$330,853
$15.132
$345485
Page 2
Saveall and associated DUITIDS and tanks
inrivte w&t0r oumD
'
•
rials
Piorng
Eleetneal
1 ndniiTM RIB
Structural
Insulation
r Connections and New Utility Systems
Etectncrtv
Steam
Water
Retnoeratcn
Fuel (Gas or Oil)
Plant Air
Inert Bas
$183.690
$67.721
$68.465
$54.046
•reparatnn
Demolition and Cleanna
Old Equipment/Rubbish Disposal
trucbon/lnstallation
In— house
Contractor
Vendor
$307.148
Memo/Contractor (In-house & Outside)
In-house Planning
In-house Engineering
Procurement
Contractor/Consultant
$166.046
$44.100
$374.822
SO
SO
$307,148
$211.046
-------
40
PROJECT TITLE: CAPITAL COSTS 1/1/93
WW/FIBER (Company Analysis)
NQT^* • haxad Mil -'-"-"IJiHi UMir Snout
Start
Cent
o___
rorn
Initial
U/flk>L>
won
Sarva
-up^Tralning
In-house
Vendor/Confraetor
Tnals/Manufacturma Variances
Trainma .
ngency
tttng
Fees
In-house
Contractor/Consultant
SO
$140.4031 $140.403
Charge tor CataJyrts and Chemicals
mg Capital
Raw Materials
Materials and Supplies
Product Inventory
Be Value
SO
SO
SO
SO
Pages
-------
41
PROJECT TITLE: . OPERATING COSTS
WW/FIBER (Company Analysis)
NOTE: a boxed cell contains user input
Enter costs as positive values: Enter saviras/ravenues as negative values
Annual Cost
Mam ($/vear) Total
Direct Materials
Fiber Loss (includes transport)
Filler Loss (includes transport)
£447.220
$79,700
S526.920
Waste Management (materials ft labor)
Pre— treatment
On-stte Handling
Storage
T reaij nent
Hauling
Insurance
Disposal
Utilities
Electricity
Steam
Water
Sewerage
SO
S273.020
$273.020
Direct Labor
Other
SO
SO
Regiilaioiy Compliance (matarials & labor)
Manifesting
Reporting
Monitoring
Testing
Labeling
Permitting
Training
SO
Insurance
SO
Revenues — Sale of Product
SO
Revenues - Marketable By-products
SO!
Total $799.940
Annual Cost
Hem (S/vear) Total
Direct Materials
Fiber Loss (includes transport)
Filler Loss (include? transport)
Flocculating Agents
$89,450
$15.940
$28.700
Waste Management (materials ft labor)
Pre — treatment
On-srte Handling
Storage
Trofl&nont
Hauling
Insurance
Disposal
Utilities
Encti icity
Steam
Water
Sewerage
$107^80
$204.760
Direct Labor
Equipment Operation
$3.120
Other
|
Regulatory Cc~p!icncc (mstcriais & Icbcr)
Manifesting
Reporting
Monitonng
Testing
Labeling
Permitting
Training '•
'
Insurance
Revenues — Sale of Product
Revenues — Marketable By— products
1
$134,090
SO
$312,040
S3. 120
$0
$0
$0
$0
SO
Total $449250
1/1/93
Page 4
Difference
BfCurr.-AtL)
$392,830
SO
($39,020
($3. 120]
$0
$0
SO
SO
SO
$350.690
-------
42
PROJECT IIIL£:
WW/FIBER (CornP"™"y Analysis)
1/1/93
PaoeS
CAPITAL AND OPERATING COST SUMMARY
Capital Costs
Purchased Equipment
Materials
Utility Connectors
Engineering/Contractor
Start- up/Training
Contingency
Permitting
Intel Catalysts/Chemicals
Depreciable Capital
Working Capital
Subtotal
Debt Interest (Installation)
Total Canrtal Reauirament
Salvage Value
Equity. %
Debt%
Interest Rate on Debt %
Equity Investment
Debt Principal
Interest on Debt
Total Financing
Depreciation Period, years
Operating Period, years
Income Tax Rate. %
Escalation Rate. %
Cost of Capital. %
(Discount Rate)
$
$345.985
$374,822
SO
SO
$397.148
$211.046
SO
$140,403
SO
SO
$1.469.404
SO
$1.469.404
SO
$1.469.404
SO
100%
0%
12%
5
$1.469.404
SO
$0
$1,469,404
15
15
40%
5.0%
1600%
Operating Costs
Direct Matenate
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance. % Capital
Labor. %
Matenab. %
Overhead. % Total Labor
Labor Burden
% of Total Labor
Revenues - Sale of Product
Revenues - Marketable
By -Products
TOTAL
Future Liability
[Year expected
= 1.2.3.etc.)
Dura once
Current Alternative fCurr -Alt)
0%
0%
_-3"
9*
0%
Ref
$526.920
$0
$273,020
$0
$0
SO
SO
SO
so
so
so
so
so
S799.94O
Year Expected
$134.090
SO
$312.040
$3.120
SO
SO
$0
$0
$0
SO
SO
$0
$0
$449.250
$392.830
$0
($39.020]
($3.120;
SO
SO
SO
SO
SO
SO
SO
SO
$0
S35O.690
Cost
(Curr -Alt)
-------
43
PROJfcei IIILC:
WW/FIBER (Company Analysis)
1/1/93
Page 6
CASH FLOW ANALYSIS
operating Year
c.».i«4>~1 Facto
REVENUES^)
Revenue - Sale of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGS^)
Direct Materials
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operatng Costs
CAPITAL COSTS(S)
invBstirMnt
Book Value
Tax Depreciation (by Strmight-lhe)
Tax Depreciation (by Double DB)
Tax Depreciation (by DDB switching to SL)
Debt Balance
Interest Payment at: 12.0%
Principal Repayment
CASH FLOW($)
Revenues
+ Operating (Costs)/Savings
Operating Cash Flow (BIT)
— uepreciauon |UUB/aL|
- Interest on Debt
Taxable Income
- Income Tax at. 40.0%
Not Incomo
4- Depreciaton (DDB/SL)
-Debt Pnneiple Repayment
-Investment (Less Debt)
(-1- or -) Working Capital
1 + Salvage Value
1 After-Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
O 1
1.000 1.050
0
0"
0
412.472
0
(40*71)
(3.276)
0
0
0
0
0
0
0
368^25
1.469.404 1 1
1.469.404 1^73.483
97.900
195*21
195*21
0 0
0
0
0
368225
368225
195.921
0
172.334
68*22
103.382
195*21
0
1.469.404 0
0 0
0
(1.469.404) 299,303
(1.469.404) (1.170.101)
(1.469.404) 258.020
2
1.103
0
0
0
433*95
0
(43.020)
(3.440)
0
0
0
0
0
0
0
386*36
I
1.103.686
97*60
169.798
169.798
0
0
0
0
386*36
386.636
169.798
0
£16.838
86.735
130.103
169.798
0
- 0
0
0
299*01
(870.201)
222.875
3
1.158
0
0
0
454.750
0
(45.171)
(3*12)
0
0
0
0
0
0
0
405*88
1
956*28
97*80
147.158
147.158
0
0
0
0
405*68
405*88
147.158
0
258*09
103*24
155286
147.158
0
0
0
0
302.444
(567.757)
193.763
1216
0
0
0
477487
0
(47.429)
(3.792)
0
0
0
0
0
0
0
426266
I
828*91
97*80
127*37
127*37
0
0
0
0
426266
426266
127*37
0
29E.729
119.492
179237
127*37
0
0
0
0
306.774
(260.982)
169.429
5
1276
0
. 0
0
501*62
0
(49*01
(3*8?
0
0
0
0
0
0
0
447*79
718.456
97*60
110*32
110*32
0
0
0
0
.447*79
'447*79
110*32
0
337.047
134.810
202228
110*32
0
0
0
0
312.760
51.778
148.909
-------
44
raojeci IIILC:
WW/FIBER (Company Analysis)
1/1/93
Pane 7
CASH FLOW ANALYSIS
Operating Year
REVENUES?*)
Revenue - Sato of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGS(»)
Direct Matenals
intasto MAn&0QfYMnt
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operatng Costs
CAPITAL COSTSm
Investment
Book Value
Tax Depreciation (by Straight-line)
Tax Depreciation (by Double DB)
Tax Depreciation (by DDB switching to SL)
Debt Balance
Interest Payment at 12.0%
Principal Repayment
CASH FLOW($)
Revenues
+ Operating (Costs)/Savings
Operating Cash Flow (BIT)
—Depreciation (DDB/SL)
— Interest on Debt
Taxable Income
- Income Tax at 40 0%
Net Income
+ Depreciation (DDB/SL)
-Debt Pnnciple Repayment
—Investment (Lass Debt)
(+ or -) Working Capital
+ Salvage Value
After-Tax Cash Flew
Cumulative Cash Flow
Discounted Cash Flow
1.340
0
0
0
526.430
0
(52.291)
(4.181)
0
0
0
0
0
0
0
469.958
I I
646.613
074)60
95.794
71.846
0
0
0
0
469.958
469.958
71.846
0
398.112
159.245
238.867
71.846
0
0
0
0
310.713
362.491
127330
1.407
O
0
0
552.751
0
(54.905)
(4.390)
0
0
0
0
0
0
0
493.456
1
574.767
97.960
86.215
71446
0
0
0
0
483.456
493.456
71.846
0
421.610
168.644
252.966
71.846
0
0
0
0
324.812
687.303
114.928
1 477
0
•0
0
580489
0
(57,650)
(4.610)
0
0
0
0
0
0
0
518.129
5024)21
974MO
76.636
71.846
0
0
0
0
518,129
518.129
71.846
0
446.283
178.513
267.770
71.846
0
0
0
0
339.616
1,026.919
103.591
9
1.551
0
0
0
609.408
0
(60.533)
(4440)
0
0
0
0
0
0
0
544.035
1
431.075
87,960
67.056
71446
0
0
0
0
544.035
544.035
71446
0
472,169
188476
283.314
71,846
0
0
0
0
355,160
1 482.078
93490
1O
1 629
0
0
0
639.879
0
(63.559
(5.082
0
0
0
0
0
0
0
571.237
359229
97.960
57.477
71446
0
0
0
0
571.237
571437
71446
0
499.391
199.756
299.635
71446
0
0
0
0
371 .481
1.753359
84.209
-------
45
PROJECI IIILC:
WW/FIBER (Company Analysis)
1/1/93
Paoe8
CASH FLOW ANALYSIS
Operating Year
REVENUES(f)
Revenue'- Sale of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGS^
Direct Materials
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operathg Costs
CAPITAL COSTS!*)
Investment
Book Value
Tax Depreciation (by Straight-fine)
Tax Depreciabon (by Double DB)
Tax Depreciation (by DDB switching to SL)
Debt Balance
|H|IIIII>| ftmiMlMHt •• i 11 Hnf
nterest Payment at : • zjfl*
Principal Repayment
CASH FLOW($)
Revenues
+ Operating (Costs)/Savmgs
Operating Cash Flew (BIT)
-Depreciation (DDB/SL)
- Interest on Debt
Taxable Income
- Income Tax at 40X1%
Net Income
T ueprecuuion IUUD/OLJ
—Debt Pnnciple Repayment
-Investment (Less Debt)
(+ or -) Working Capital
+ Salvage Value
Alter— Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Row
1.710
0
0
0
671.873
0
(66.737)
(5.336)
0
0
0
0
0
0
0
599.799
1 1
287.383
97.960
47497
71346
0
0
0
599.799
599.799
71346
0
527353
211.181
316.772
71346
0
0
0
0
388.618
2.142.177
75.942
12
1.796
0
0
0
705.466
0
(70.074)
(5303)
0
0
0
0
0
0
0
629,789
1
215338
97360
38318
71346
0
0
0
629.789
629.789
71346
0
557343
223.177
334.766
71346
0
0
0
0
406.612
2.548.788
68.499
1386
0
0
0
740.740
0
(73378)
(5383)
0
0
0
0
0
0
0
661378
1
143392
97360
28.738
71346
0
0
0
661.278
661.278
71346.
0
589.432
235.773
353.659
71.846
0
0
0
0
425.505
2.974.293
61.795
1380
0
0
0
777.777
0
(77.257)
(8.177)
0
0
0
0
0
0
0
694342
I
71346
97360
19.159
71346
0
0
0
694342
694342
71346
0
622.496
248.999
373.498
71346
3
0
0
0
'445.344
3.419.637
55.755
15
2.079
0
0
0
816365
0
(81.120;
(6.486;
0
0
0
0
0
0
0
729359
0
97360
9379
71346
0
0
0
729.059
729.059
71346
0
6S7.213
262385
394328
71346
0
0
0
t>
466.174
3385311
50.313
-------
PROJECT TITLE:
WW/RBER (Company Analysis)
Page 9
PROFITABILITY ANALYSIS SUMMARY
Net Present Value ($)
Internal Rate of Return
Payback (years)
Years 1-5 Years 1-10 Years 1-15
($476.408)
1%
4.2
$47.240
17%
$359.544
21%
Year 1 -Year of Choice
Year of Choice =
Net Present Value ($)
Internal Rate of Return
($233,950;
10%
-------
47
TOTAL COST ASSESSMENT-METHOD 1
WHITE WATER/FIBER REUSE PROJECT
-------
48
1/1/93
Pagel
PROJECT TITLE:
WW/FIBER (Total Cost Assessment, Method 1)
PREPARED BY:
Risk Analysis Group
ORGANIZATION:
Tellus Institute
COMMENTS:
This spreadsheet incorporates the data from a Total Cost Assessment of the
Whitewater/fiber recycle project.
Method 1 was used for entering the TCA data, i.e. operating costs and revenues
were entered for both the current and alternative processes.
P2/FINANCE
Pollution Prevention Financial Analysis
and Cost Evaluation System
Version 2.0
Copyright 1993
Tellus Institute
Boston, MA
-------
49
PRO
WW/I
NOT
JECT TITLE:
E' A bomd-GAll fiCFltftVI
Purd
Mate
Utflitj
SrteF
Cons
Engir
Used Equipment
Equipment— —Phase
Equipment— —Phase
ft user mDut
CAPITAL COSTS 1/1/93
1
Delivery
Sales tax
Pnce tor Initial Spare Parts
rials
$330353
815.132
Piping
Electrical
Instruments
Structural
Insulation
$183.690
867.721
868.465
854.946
$345.985
8374322
Page 2
Saveall and associated pumps and tanks
White water pump
r Connections and New Utility Systems
Eleetnotv
Steam
Water
Refrigeration
Fuel (Gas or Oil)
Plant Air
Inert Gas
•reparation
Demolition and Clearing
Old Equipment/Rubbish Disposal
Iruction/lnstallation
In— house
Contractor
Vendor
i
$397.148
80
80
$397.148
leering/Contractor (In-house & Outside)
In-house Planning i
In-house Engineering ' $166,946
Procurement
Contractor/Consultant
: $44.100
$211.046
-------
50
PROJECT TITLE:
WW/FIBER (ToUl Cart
CAPITAL COSTS
AMMsmant. Method 1)
1/1/83
Cost
Totals IRef. I Notes.
Pagea
Start-up/Training
In— house
Vendor/Contractor
Tnals/Manutactunna Variances
Training .
•
SO
".
Contmgsncy
L
J S140.403I SI40.403 I I
Fees
In— house
Contractor/Consuttant
SO
Initial Charge for Catalysts and Chemicals
SO
Working Capital
Raw Materials
Materials and Supplies
Product Inventory
SO
Salvage Value
SO
-------
51
PROJECT TITLE:
unvnriRPR fTatal Cast Amtwtmant Itaftiad
NOTE: a boxad call contains user mput
D
Annual cost
Ham (S/yeari Total
Direct Materials
Fiber Loss (includes transport)
Filler Loss (Includes transport)
Water Treatment Chemicals '
$447220
$79.700
$38.870
$565.790
Waste Management (materials ft labor)
Pro ~tr8SbTient
On -site Handling
Storage
Trefitment
Hauling
Insurance
Disposal
Utilities
Electricity
StBAfYl
Water
Sewerage
$0
$348.760
S59O.100
$273,020
$1.211.880
Direct Labor
$0
Other
SO
Regulatory Compliance (materials A labor)
Manifesting
Reporting
Monitonng
Testng
Labeling
Permitting
Training
$0
Insurance
SO
Revenues — Sale of Product
SO
Revenues - Marketable By-products
$0
Total $1.777.670
OPERATING COSTS
Direct Materials
Fiber Loss (includes transport)
Filler Loss (includes transport)
Water Treatment Chemicals
Flocculating Agents
$89.450
$15.940
$12.960
$28.700
Waste Management (materials ft labor)
Pre — treatment
On -site Handling
Storage
Treatment
Hauling
Insurance
Disposal
Utilities
Electricity
Steam
Water
Sewerage
1314.780
$196.700
$204.760
Direct Labor
Equipment Operation
$3.120
Other
Regulatory Compliance (materials ft labor)
Manifesting
Reporting
Monitoring
Testing
Labeling
Pel milling
Training
Insurance
Revenues — Sale of Product
1
Revenues — Marketable By-products
$147.050
$0
$716,240
$3.120
$0
$0
$0
$0
$0
Total $866.410
1/1/83
Page 4
: Difference
=(Curr.-ArLI
$418.740
$0
$495440
($3.120]
$0
$0
$0
$0
$0
$911260
-------
52
PROJECT MILE:
WW/FIBER (Total Cost Assa
osrnent. Method 1)
1/1/93
PaaeS
CAPITAL AND OPERATING COST SUMMARY
Capital Costs
Purchased Equipmsnt
Mate-rate
Uthty Connectons
Site Preparation
Installation
Engmeering/Conto'actor
Start-up/Training
contingency
f^ ,,-— -jftfcj. -B
i uiiuuiiiy
Initial Catalysts/Chemicals
Depreciable Capital
Working Capital
Subtotal
Debt Interest (Installation)
Total Capital Requirement
Salvage Value
Equity. %
Debt.%
Interest Rate on Debt %
Debt Repayment, years
Equity Investment
Debt Principal
Interest on Debt
Total Financing
Depreciation Period, years
Operating Period, years
Income Tax Rate. %
Escalation Rate. %
Cost of Capital. %
(Discount Rate)
$
$345.985
$374.822
$0
$0
$397.148
$211.046
SO
$140.403
$0
SO
$1.469.404
$0
$1.469.404
SO
$1.469.404
$0
100%
0%
12%
5
$1.469.404
$0
SO
$1.469.404
15
151
40%
5.0%
1600%
OperstinQ Costs
Direct Maturate
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance. % Capital
Labor. %
Materials. %
Overhead. % Total Labor
Labor Burden
% of Total Labor
Revenues - Sale of Product
Revenues - Marketable
By- Products
TOTAL
Future Liability
(Tear expected
= 1.2.3.etc.)
Difference
Current Alternative fCurr -AM)
0%
0%
0%
Ref.
$565.790
$0
$1.211.880
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$1.rrs,£70
Year Expected
I
$147.050
$0
$716.240
$3.120
$0
$0
$0
$0
$0
$0
$0
$0
$0
$866,410
$418.740
$0
$495.640
($3.120]
$0
$0
$0
$0
$0
$0
$0
$0
$0
$911.260
Cost
(Curr -AIL)
-------
53
PHOJtei IIILE:
WW/FIBER (TOttl Coat Assessment. Method 1)
1/1/93
Pa«
16
CASH FLOW ANALYSIS
operating Year
REVENUES($)
Revenue •• Saw of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGS($)
Ris^MMt> Mlrtalillilat
UIlWCi IHIBUrHl*
Waste Management
Utijtaes
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Opening Costs
CAPITAL COSTS(S)
invBRffMnt
Book Value
Tax Depreciation (by Straight-lne)
Tax Depredabon (by Double DB)
Tax Depreciation (by DDB switching to SL)
Debt Balance
Interest Payment at : 1 2.0%
Principal Repayment
CASH FLOW(S)
Rownucs
+ Operating (Cosb>)/Savings
Operating Cash Flow (BIT)
-Depreciation (DDB/SL)
-Interest en Debt
Taxable Income
- Income Tax at: 40*%
Net Income
.L n«M»^.».,»iM*M fnno/ci i
•r Depreciaoon (UDD/SL.)
-Debt Principle Repayment
-investment (Less Debt)
(+ or -) Working Capital
+ Salvage Value
After-Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Row
O 1
1.000 1*50
0
0
0
439*77
0
520.422
(3.276)
0
0
0
0
0
0
0
956*23
1.469.4041 1
1.469.404 1.273.483
97*60
195*21
195*21
0 0
0
0
956*23
956*23
195*21
0
760.902
304.36;
456*41
195*21
0
1.469.404 0
0 0
0
(1 .469.404) 652.462
(1,469.404) (816.942)
(1 .469.404) 562.467
Z
1.103
0
0
0
461.661
0
546.443
0*40)
0
0
0
0
0
0
0
1*04*64
1
1.103*86
97*60
169.798
169.796
0
0
0
1*04*64
1.004*64
169.798
0
834*66
333.847
500*20
169.798
0
0
• 0
0
670.718
(146.224)
498.452
3
1.158
0
0
0
484.744
0
573.765
(3*12)
0
0
0
0
0
0
0
1*54*97
1
956*28
97*60
147.158
147.158
0
0
0
1*54*97
1*54*97
147.158
0
907.739
363.096
544*44
147.158
0
0
0
0
691 ,802
545*77
443.208
4
1.216
0
0
0
508*81
0
602.454
(3.792)
0
0
0
0
0
0
0
1,107*42
I
828*91
97*60
127*37
127*37
0
0
0
0
1.107*42
1.107*42
127*37
0
980.105
392.042
588.063
127*37
0
0
0
0
715,600
1561.177
395.220
5
1276
0
0
.0
534.430
0
632*76
(3,982
0
0
0
0
0
0
0
1,163*24
718.458
97*60
110*32
110*32
0
0
0
0
1.163.024
1.163.024
110*32
0
1.052.492
420.997
631.495
110*32
0
0
0
0
742.027
2,003.205
353.289
-------
54"
PHO Jfci; i 1 1 1 LC:
WW/F1BER (ToUl Cost Assessment. Method 1)
1/1/03
Paa
• 7
CASH FLOW ANALYSIS
operating Year
fmmm tmttnm. fmtftf*
REVENUES!*)
Revenue - Sato of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGS(S)
Dneet Material*
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operatng Costs
CAPITAL COSTS(S)
Invostflnont
Book Value
Tax Depreciaton (by Straight-lne)
Tax Depreciaton (by Double DB)
Tax Depreciaton (by DDB switching to SL)
Debt Balance
Interest Payment at • 1 2.0%
Principal Repayment
CASH FLOW($)
Revenues
+ Operating (Cocts)/Savings
Operating Cash Flow (BIT)
-Depreciation (DDB/SL)
- Interest on Debt
Taxable Income
- Income Tax at 40 0%
Net Income
+ Depreciaton (DDB/SL)
-Debt Principle Repayment
—Investment (Less Debt)
(+ or -) Working Capital
| + Salvage Value
| After-Tax Cash Flow
1 Cumulative Cash Flow
i Discounted Cash Flow
1.340
0
0
0
561.152
0
664.205
(4.181)
0
0
0
0
0
0
0
1221,176
1 !
646.613
97.960
95.794
71346
0
0
0
0
1221.176
1221.176
71.846
0
1.149.330
459.732
689.598
71346
0
0
0
0
761.444
2.764.649
312.529
7
1.407
0
0
0
589209
0
697.415
(4.390)
0
0
0
0
0
0
0
1282234
I
574,767
97.960
86.215
71346
0
0
0
0
1.282234
1282.234
71346
0
1.210388
484.155
726233
71.846
0
0
0
0
796.079
3.562.727
282.384
8
1 477
0
0
0
618370
0
732.286
(4.610)
0
0
0
0
0
0
0
1346346
1
502321
97360
76336
71346
0
0
0
0
1.346346
1346346
71346
0
1.274300
509300
764.700
71.846
0
0
0
0
836.546
4399.273
255.168
9
1351
0
0
0
649.603
0
768300
(4340)
0
0
0
0
0
0
0
1.413,663
1
431 .075
97360
67.056
71346
0
0
0
0
1.413363
1.413.663
71.846
0
1.341318
536.727
805.091
71346
0
0
0
0
876.936
5.276.210
230,593
1O
1329
0
0
0
682,083
0
807345
(5.082
0
0
0
0
0
0
0
1 ,484347
359229
97360
57.477
71346
0
0
0
0
1.484347
1.484347
71346
0
1.412301
565.000
847300
71346
0
0
0
0
919.346
6.195.556
208.401
-------
55
PHOJtu i 111 LE:
WW/FIBER (Total Co«t A*sa*sment. Italhed 1)
1/1/93
Paoea
CASH FLOW ANALYSIS
operating YMT
B___|_AM^_ C^jBlMM
m^Mivn^^ rBBcDv
REVENUES^)
Revenue - Sato of Product
Revenue - Marketable By-product*
Annual Revenue
OPERATING COST/SAVINGS(S)
niimftt ftlntnpifilfi
ISIIvCl MtUvrllB*
Waste Management
Utilites
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operatng Costs
CAPITAL COSTS0)
IHVOStlTMflt
Book Value
Tax Depreciation (by Straight-bne)
Tax Depreeiaton (by Double DB)
Tax Depreciabon (by DDB switching to SL)
Debt Balance
Interest Payment at : 1 2.0%
Principal Repayment
CASH FLOW(*)
Revenues
+ Operating (Cosb>)/Savmgs
Operating Cash Flow (BIT)
-Depreeiataon (DDB/SL)
- Interest on Debt
Taxable income
- Income Tax at 40.0%
Net Income
+ Depreciabon PDB/SL)
-Debt Principle Repayment
-Investment (Less Debt)
(+ or -) Working Capital
+ Salvage Value
Alter— Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
ll
1.710
0
0
0
716.188
0
847.713
(5.336)
0
0
0
0
0
0
0
1358.564
I I
287483
97460
47^97
71446
0
0
0
0
1458.564
1.558.564
71.846
0
1.486.718
594.687
892.031
71.846
0
0
0
0
963477
7.159.433
188.358
12
1.796
0
0
0
751497
0
890.098
(5403)
0
0
0
0
0
0
0
1 .636.492
1
215438
974«0
38418
71446
0
0
0
0
1 .636.492
1 .636.492
71.846
0
1 .564.648
625458
938.788
71446
0
0
0
0
1.010.634
8.170.066
170.254
13
1486
0
0
0 '
789497
0
934403
(5483)
0
0
0
0
0
0
0
1.718.317
I
143492
97460
28.738
71446
0
0
0
0
1.718417
1.718417
71446
0
1.646.471
658488
987482
71.846
0
0
0
0
1 .059.728
9.229.795
153.901
14
1.980
0
0
0
829.077
0
981433
(6.177)
0
0
0
0
0
0
0
1. 804,232
I
71446
97460
19.159
71446
0
0
0
0
1.804.232
1.804.232
71.846
0
1 .732.387
692.955
1 .039.432
71.846
Q-
0
0
0
1.111.278
10.341.072
139.127
15
2.079
0
-0
0
870.530
0
1.030.400
(6.486;
0
0
0
0
0
0
0
1494.444
0
97460
9479
71446
0
0
0
0
1,894.444
1494.444
71446
0
1.822498
729.039
1 .093459
71.846
0
0
0
0
1.165.405
11.506.477
125.779
-------
56
PROJECT TITLE:
WW/FIBER (Total Cost Assessment, Method 1)
Page 9
PROFITABILITY ANALYSIS SUMMARY
Net Present Value ($)
Internal Rate of Return
Payback (years)
Years 1 -5 Years 1 -10 Years 1-15
$783.232
37%
1.6
$2.072.306
46%
$2.849.725
48%
Year 1 -Year of Choice
Year of Choice
Net Present Value {$)
Internal Rate of Return
81,378,145
43%
-------
57
TOTAL COST ASSESSMENT-METHOD 2
WHITE WATER/FIBER REUSE PROJECT
-------
58
1/1/93
Pagel
PROJECT TITLE:
WW/FIBER (Total Cost Assessment, Method 2)
PREPARED BY:
Risk Analysis Group
ORGANIZATION:
Tellus Institute
COMMENTS:
This spreadsheet incorporates the data from a Total Cost Assessment of the
Whitewater/fiber recycle project.
Method 2 was used for entering the TCA data, i.e. operating costs, savings and
revenues were entered for the alternative process only.
P2/FINANCE
Pollution Prevention Financial Analysis
and Cost Evaluation System
Version 2.0
Copyright 1993
Tellus Institute
Boston, MA
-------
59
PROJECT TITLE: CAPITAL COSTS 1/1/03
WW/FIBER (Total Gael Assessment. Method 2)
NOTE* A boxAd CA!) contflfflS UMf tnnut
Purgluml Cmimnmif
Mate
Utilrt)
SrteF
Cons
Engti
Eaunment — Phase 1
Eouioment*1' ^Pluuw II
Delivery
Sales tax
Price for Initial Spare Parts
S330.8S3
SI 5.1 32
rials
Piping
Electrical
Instruments
Structural
Insulation
$183.690
S67.721
(68.465
$54.940
I Connections and New Utility Systems
Electnotv
Steam
Water
R«fngeraton
Fuel (Gas or Oil)
Plant Air 1
Inert Gas !
•reparation
Demolition and Ctoannn
Old EauiDfnent/Rubbish Disposal '
1
traction/Installation
m-nouse
Contractor $397.148
Vendor I
I
keenng/Contractor On— house & Outside)
In-house Planning '
In-house Engineering i $166.046
Procurement
Contractor/Consultant $44.100
$345.985
$374.822
SO
SO
$397.148
S21 1 .046
Page 2
Saveall and associated pumps and tanks
White water oumo
1
1
-------
60
PROJECT TITLE:
WW/FIBER (Total Cart Atseument, Method 2)
CAPITAL COSTS
1/1/»3
Canttal Cortm
Totals I Ret 1 Notes
Page 3
Start-up/Trammfl
In— house
Vendor/Contractor
Trials/MonUfaetunne Vananees
Trainina
.
SO
.
Contingency
$140.4031 S140.403 I
Fees
In-house
Contractor/Consultant
SO
Initial Charge for Catalyrts and Chemicals
SO
U/flMt>HB« f* «•»••« I
worrang uaprau
Raw Materials
Materials and Sueolies
Product Inventory
SO
Salvage Value
SO
-------
61
PROJECT TITLE: OPERATING COSTS
WW/FIBER (Total Cost Assessment Method 2)
NOTE: a boxed cell contains user input
Enter costs es positive values: Enter savinas/revenues as negative values
Annual Cost
Hem (*/ve«rt Total
Direct Materials
Fiber Loss (includes transport)
Filler Loss (includes transport)
Water Treatment Chemicals
$0
Waste Management (materials & labor)
Pre— trestonent
On-site Handling
Storage
Treatment
Hauling
Insurance
Disposal
$0
Utilities
Electricity
Steam
Water
Sewerage
SO
Direct Labor
$0
Other
SO
Regulatory Compliance (materials £ labor)
I Manifesting
Reporting
Monitonng
i Testing
I Labeling
Permitting
I Training
$0
Insurance
i $0
Revenues - Sale of Product
SO
Revenues — Marketable By-products
i
- so
Total SO
ALTERNAllvc PROCESS
Annual Cost
Hem ft/year) Total
Direct Materials
Fiber Loss (includes transport)
Filler Loss (includes transport)
Water Treatment Chemicals
Flocculating Agents
($357.770
$63.760
$25.910
$28.700
Waste Management (materials A labor)
Pro ~ trea«ment
On -site Handling
Storage
Treatment
Hauling
Insurance
Disposal
Utilities
Eluclrictty
Steam
Water
Sewerage
($33.980
($393,400
($68.260
Direct Labor
cQuipment Operation
$3.120
Other
Regulatory Compliance (materials * tabor)
Manifesting
Reporting
Monitoring
Testing
Labeling
Permitting
Training
Insurance
Revenues — Sale of Product
Revenues - Marketable By-products
($418.740
$0
($495.640
$3.120
$0
$0
$0
SO
$0
Total ($911,260
1/1/93
Page 4
Difference
= (Curr.-ArU
$418.740
$0
$495.640
($3.120]
$0
$0
$0
$0
$0
$91 1 260
-------
62 .
WW/FIBER fTotal Cost Assc
1/1/93
PaaeS
CAPITAL AND OPERATING COST SUMMARY
Capital Coats
Purchased Equipment
Materials
Utility Connections
Site Preparation
Installation
Engineering/Contractor
Start-up/Training
Permitting
Initial Catalysts/Chemicals
Depreciable Capital
Working Capital
Subtotal
Debt Interest (Installation)
Total Capital Requirement
Salvage Value
Equity. %
Debt%
merest Hate on Deot. %
Debt Repayment years
Equity Investment
Debt Principal
Interest on Debt
Total Financing
Depreciation Period, years
Operating Period, years
Income Tax Rate. %
Escalation Rate. %
Cost of Capital. %
(Discount Rate)
s
$345.985
$374,822
$0
SO
$397.148
$211.046
$0
$140.403
$0
SO
$1,469,404
SO
$1,469,404
SO
$1,469.404
SO
100%
0%
12%
5
$1,469.404
SO
SO
$1.469.404
15
15
40%
5.0%
16.00%
Operating Costs
Direct Materials
Waste Management
Utilities
Direct Labor
Other
Regulatory Comphance
Insurance
Maintenance. % Capital
Labor. %
Matenals.%
Overhead. % Total Labor
Labor Burden
% of Total Labor
Revenues - Sale of Product
Revenues - Marketable
By- Products
TOTAL
Future Liability
(Year expected
= 1.2.3.etc.)
Difference
Current Alternative (Curr -AIL)
0%
* 0%
0%
0%
Ret
SO
SO
$0
$0
SO
SO
SO
!O
IO
SO
so
so
so
so
Year Expected
($418.740)
SO
($495.640)
$3.120
$0
$0
$0
$0
$0
$0
$0
$0
$0
($911.260)
S41 8.740
SO
$495.640
($3.120;
SO
SO
SO
SO
SO
$0
$0
$0
SO
$911.260
Cost
(Curr -AIL)
-------
63
rnujeui IIILC:
1/1/83
d2)
Paoe6
CASH FLOW ANALYSIS
Operating Yaw
Etf ni»«««) Factor
REVENUES'*)
Revenue - Sato of Product
Revenue - Marketable-By-products
Annual Revenue
OPERATING COST/SAVINGSff)
Direct Materials
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operatng Costs
CAPITAL COSTS(»)
Investment
Book Value
Tax Depreciabon (by Double DB)
Tax Depreciation (by DDB switching to SL)
Debt Balance
Interest Payment at : 1 2.0%
Principal Repayment
CASH FLOW0)
Revenues
+ Operating (Cosbs)/Savings
Operating Cash Flow (BIT)
-Interest on Debt
Taxable Income
-Income Tax at 40.0%
Net Income
+ Depreciabon (DDB/SL)
-Debt Principle Repayment
-Investment (Less Debt)
(+ or -) Working Capital
+ Salvage Value
After -Tut Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
1.000 1.050
0
0
0
439.677
0
520.422
(3.276)
0
0
0
0
0
0
0
956323
1469.4041 1
1.469.404 1.273.483
97,960
195,921
195,921
0 0
0
0
0
956.823
956323
195321
0
760.902
304.361
456341
195.921
0
1.46.9.404 0
0 0
.0
(1 ,469.404) 652.462
(1.469.404) (816.942)
(1 .469.404) 562.467
1.103
0
0
0
461361
0
(3.440)
0
0
0
0
0
0
0
1304364
I
1.103366
97360
169.798
169.798
0
0
0
0
1.004.664
1.004.664
169.798
0
834.866
333347
500320
169.798
0
0
0
0
670.718
(146.224)
498.452
1.158
0
0
0
484.744
0
573.765
(3312)
0
0
0
0
0
0
0
1354397
1
056328
97360
147.158
147.158
0
0
0
0
1.054.897
1.054397
147.158
0
907.739
363.O96
147/158
0
0
0
0
691302
545377
443.208
4
1.216
0
0
0
508381
. 0
602.454
(3.792)
O
0
0
0
0
0
0
1.107342
1
628391
97.960
127337
127337
0
0
0
0
1.107.642
1.107342
127337
0
PSO.'OS
392.042
588.063
127.537
0
0
0
0
715.600
1.261.177
395.220
5
1276
0
0
0
534.430
0
632376
(338?
0
0
0
0
0
0
0
1.163324
716.458
97360
110332
110332
0
0
0
0
1.163324
1.163.024
110332
0
1.052.492
420.097
631.495
110332
0
0
0
0
742.027
2.003205
353.289
-------
64
rnujetii IIILC:
WW/FIBER (Total Cost Assessment. IMhod 2)
1/1/83
Pane?
CASH FLOW ANALYSIS
Operating Year
Escalation Factor
REVENUES(S)
Revenue - Sole of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGS($)
Direct Materials
Waste Management
Utilities
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Opening Costs
CAPITAL COSTSW
Inwttfnont
Book Value
Tax Depreciation (by StraigM-lne)
Tax Oepreeiataon (by Double DB)
T_*f nMM*AMiBliMM fhtj nnR DMMtohmn tn fill
•x uepreciBBon |oy UUD swncning 10 OLJ
Debt Balance
Interest Payment at 120%
Pnncipal Repayment
CASH FLOW(*)
Revenues
•f Operatng (Costal/Savings
Operating Cash Flow (BIT)
-Depreciation (DDB/SL)
- Interest on Debt
Taxable Income
- Income Tax at 40 0%
Net Income
+ Depreciation (DDB/SL)
-Debt Principle Repayment
-Investment (Less Debt)
(+ or -) Working Capital
+ Salvage Value
After -Tax Cash Flow
Cumulative Cash Flow
Discounted Cash Flow
1.340
0
0
0
561.152
0
664.205
(4.181)
0
0
0
0
0
0
0
1.221.176
1 1
646.613
97.960
95.704
71.846
0
0
0
0
1221.176
1221.176
71.846
0
1,149.330
459.732
689598
71.846
0
0
0
0
761.444
2.764.649
312.529
7
1 407
0
0
0
589.209
0
697.415
(4.390)
0
0
0
0
0
0
0
1282234
1
574.767
97.960
86215
71346
0
0
0
0
1.282234
1282234
71.846
0
1210.388
484.155
726233
71346
0
0
0
0
798.079
3.562.727
282.384
H
1 477
0
0
0
618^70
0
732286
(4.610)
0
0
0
0
0
0
0
1346346
1
502.921
97360
76336
71346
0
0
0
0
1346346
1346346
71.846
0
1274300
509300
764.700
71.846
0
0
0
0
836.546
4399.273
255.168
9
1351
0
0
0
649303
0
768.900
(4340)
0
0
0
0
0
0
0
1,413,663
1
431 .075
97360
67.056
71346
0
0
0
0
1.413.663
1,413.663
71346
0
1341.818
536.727
805.091
71.846
"0
0
0
0
876.936
5276.210
230.593
1O
1.629
0
0
0
682.083
0
807345
(5.082
0
0
0
0
0
0
0
1.484347
359229
97360
57.477
71346
0
0
0
0
1.484347
1.484347
71346
0
1.412301
565.000
647.500
71346
0
0
0
0
919.346
6,195.556
208.401
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65
PHOJfcm IIILC:
WW/FIBER (Total Cost Assessment. Method 2)
1/1/93
Pao
e8
CASH FLOW ANALYSIS
operating Year
§•_•• •_ AI_M C •*••*•
m^Humgfj rfldOT *
REVENUES($)
Revenue - Sato of Product
Revenue - Marketable By-products
Annual Revenue
OPERATING COST/SAVINGSm
flu AH 1 ftiatAriarfn
Direct MBvBnflis
W&st0 MflFIBUBHUBflt
Utflibes
Direct Labor
Other
Regulatory Compliance
Insurance
Maintenance
Overhead
Labor Burden
Liability
Total Operatang Costs
CAPITAL COSTSff)
InvvctnMnt
Book Value
Tax Depreeiaton (by StraigM-lne)
Tax Depreciabon (by Double DB)
Tax Depreciation (by DDB switching to SL)
Debt Balance
Interest Payment at : 1 2.0%
Pfinctp&J RftpAyTTwnx
CASH FLOW(S)
Revenues
+ Operating (Cosb)/Savings
Operating Cash Flow (BIT)
-Depreciation (DDB/SL)
- Interest en Debt
Taxable Income
- Income Tax at 40.0%
N0t Incoirw
+ Depreciabon (DDB/SL)
-Debt Principle Repayment
-Investment (Less Debt)
(+ or -) Working Capital
+ Salvage Value
After-Tax Cash Flow
Cumulative Cash Row
Discounted Cash Row
1.710
0
0
0
74 A IttA
71 Q.I no
g
847.713
(5.336)
0
0
0
0
0
0
0
1558564
I I
287.383
97.960
47.897
71348
0
0
0
0
1.558.564
1558.564
71^48
0
1.486.718
504.687
892.031
71346
0
0
0
0
963377
7.159.433
188.358
12
1.796
0
0
0
7R4 OQ7
f9tJU9 1
Q
890398
(5303)
0
0
0
0
0
0
0
1 338.492
1
215338
97360
38318
71346
0
0
0
0
1338.492
1336.492
71346
0
1 .564.646
625358
938.788
71346
0
0
0
0
1.010334 '
8.170.066
170.254
13
1.886
0
0
0
7ttO fttt7
T99JS97
g
934.603
(5363)
0
0
0
0
0
0
0
1.718317
1
143392
97360
28.738
71346
0
0
0
0
1.718317
1.718317
71346
0
1346.471
658388
987382
71346
0
0
'0
0
1.059.728
9.229.795
153.901
14
1380
0
0
0
O4H MW
WDJfffr
Q
981333
(6.177)
0
0
0
0
0
0
0
1304.232
I
71346
97360
19.159
71346
0
0
0
0
1304232
1304332
71346
0
1.732.387
692.B55
1339.432
71.846
0
0
0
0
1.111378
10341372
130.127
IS
2379
0
.0
'0
fl7fi Kin
V7OJS3O
Q
1330.400
(6.468
0
0
0
0
0
0
0
1384.444
0
97360
9379
71346
0
0
0
0
1394.444
1394.444
71346
0
13=2383
729.O39
1393359
71346
0
0
0
0
1.165.405
11306.477
125.770
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66
PROJECT TITLE:
WW/FIBER (Total Cost Assessment, Method 2)
Page 9
PROFITABILITY ANALYSIS SUMMARY
Net Present Value ($)
Internal Rate of Return
Payback (years)
Years 1 -5 Years 1-10 Years 1-15
$783.232
37%
1.6
$2.072.306
46%
$2.849.725
48%
Year 1 -Year of Choice
Year of Choice
Net Present Value ($)
Internal Rate of Return
$1,378,145
43%
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67
APPENDIX D
GLOSSARY OF FINANCIAL TERMS
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68
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
Financial Reporting
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.
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.
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69
Financial Statements
Full Cost Accounting
Hurdle Rate
Incremental Cash Flow
(of an investment)
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.
Managerial Accounting
Internal Rate of Return
(IRR) 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, ERR, payback, ROI.
Net Present Value (NPV) The present value of the future cash flows of an investment less
the investment's current cost.
Measure of Profitability
-------
70
NPV
where:
CF, + .CFj + CF. -I
1+k (1+k)2 (1+k)'
CF, 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
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.
Payback Period
Project Financial
Analysis
Project Justification
Process
Project Justification
The amount of time required for an investment to generate
enough cash flow to just cover the initial capital outlay for that
investment.
Payback = Investment/Annual Net Income
Costing (i.e. calculating the costs and savings) and calculating
cash flow and/or profitability measures of a project.
A generic term for a series of steps which are necessary to get
approval for a project.
A document prepared in the project justification process which
comprising a written description of the project, a project
• financial analysis, and a discussion of benefits and risks which
are not quantified in the financial analysis.
Return on Investment
(ROI) A measurement of investment performance, calculated as the ratio of
annual net income (minus depreciation) over the initial investment
amount.
ROI = Annual Net Income/Investment
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71
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) 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.
-------
APPENDIX E
P2/FINANCE ASSUMPTIONS
-------
73
P2/FTNANCE ASSUMPTIONS
1) Salvage Value: The Salvage Value entered into the bottom of page 3 of the worksheet
file is used in depreciation calculations on pages 6 through 8. Salvage Value is therefore
not adjusted for inflation and the values entered into the worksheet should be estimates
of actual salvage value in the final depreciation year. For the sake of simplicity, it is
assumed that this salvage value is cashed in during the final depreciation year and
therefore becomes part of the cash flow during that year. The Depreciation Period, years
(bottom of page 5) is used for the depreciation calculations and for determining when
the Salvage Value of the capital purchases becomes part of the cash flow.
2) Working Capital: The Working Capital entered into the bottom of page 3 of the
worksheet file is assumed to be a one time capital expense at the beginning (i.e. year
zero) of the project and a one time revenue at the end of the project. Working Capital
is therefore adjusted for inflation and is cashed in during the last operating year. The
Operating Period, years (bottom of page 5 in the Capital Costs section) is used only to
determine when Working Capital is cashed out. P2/FINANCE will, however, continue
cash flow calculations until the last year shown on the FifteenJT worksheet, i.e. year IS.
3) Depreciation Period vs. Operating Period: The Depreciation Period, years (bottom of
page 5 in the Capital Costs column) and the Operating Period, years (in the row below
Depreciation Period, years in the same column) are not always the same. Depreciation
Period, for example, may be determined by a legal definition for tax depreciation
purposes (e.g. 7 years), while the actual expected Operating Period for the equipment
may be longer (e.g. 15 years).
4) Construction Year:. On page 5 of the worksheet file, one year of construction time was
assumed as necessary for a typical project. Therefore, in cases where part of the
necessary funding for a project is borrowed (i.e. Debt, % on page 5 is not equal to zero),
one year of interest on the loan (Interest on Debt, %) is added to the Subtotal (in the
same column, eight lines above) of Depreciable Capital and Working Capital to obtain
the Total Capital Requirement which is necessary to have the project/process up and
running at the end of the construction period. The interest for the construction year is
therefore not paid off at the end of that year, but is added to the original capital estimate
and is paid off gradually over the lifetime of the loan.
5) Income Tax Rate: P2/FINANCE accepts only one Income Tax Rate, % (bottom of page
5) for tax calculation purposes. If more than one tax rate is applicable to the project
under analysis, such as state and Federal tax rates, then the rates may be combined to
obtain one equivalent rate for the Summary worksheet.
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