What is the net cost or benefit of the project, assuming a discount rate of 10 percent over 10 years?

Engineering Economics and Pollution Prevention
1. You are working for a factory and have been asked to assess the economic impacts of implementing a new pollution prevention program at the factory. The factory
managers required you to design the program so that the production from the factory
is not reduced by the pollution prevention program. Currently, the factory has an
annual operation cost of $480,000/yr. It currently costs the factory $75,000 per year
to dispose of its waste. The plan that you developed will have an initial equipment
cost of $100,000. However, the result of your plan will reduce the annual operating
cost to $400,000/yr and the waste disposal cost to $30,000/yr.
a. Assuming a constant discount rate of 7 percent, how long will it take the factory
to break even on their investment in your pollution prevention program?
2. A metal plating operator is considering installing an ion exchange unit to recover and reuse metals currently lost in the rinse waters from the plating line. The company
presently pays a sewer usage fee of $4.00 per kg of metal sent to the sewage
treatment plant. The metal plater is currently discharging 1,000 kg/yr of metal to the
sewer. The metal costs the company $120 per kilogram to purchase. The ion
exchanger will recover 98 percent of this metal, and all of this recovered metal can be
reused in the metal plating operation. The ion exchange unit will cost $50,000 to
purchase and install and $12,000 per year to operate.
a. What is the net cost or benefit of the project, assuming a discount rate of 10
percent over 10 years?
b. What is the payback period for the ion exchange unit?
c. Based on your economic analysis, would you recommend that the ion exchange
unit should be installed to the metal plater? Why?
d. Discuss how two other factors besides economics might influence the decision.

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