T7 P2. Economic Analyses. Economic Estimation. WAG = wild a… guess SWAG = sophisticated WAG WAGNER = WAG not easily refuted. Present Worth Analysis. “Lump sum” future costs Annualized costs. Example - PW Analysis.
“Lump sum” future costs
A firm needs to expand its manufacturing capacity. The present facility could be expanded to meet the needs at a cost of $1.2 million. Waste treatment costs for the expanded facility would be about $184,000 per year. An entirely new facility that would reduce waste production could be built for approximately $3.35 million. The new facility would have an estimated annual waste treatment cost of $56,000. Assume a 20-year useful life for the facilities and a zero salvage value for both. If the prevailing interest rate is 10%, which alternative is preferable?
B = benefits
C = costs
D = disbenefits or negative benefits
A manufacturing plant is faced with the loss of a hazardous waste disposal site. It is evaluating three strategies.