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# T7 P2 - PowerPoint PPT Presentation

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.

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## PowerPoint Slideshow about ' T7 P2' - noah-jordan

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### T7 P2

Economic Analyses

• WAG = wild a… guess

• SWAG = sophisticated WAG

• WAGNER = WAG not easily refuted

“Lump sum” future costs

Annualized 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

Method:

• Identify factors

• Assign weights

• Assign relative effectiveness score

• Calculate effectiveness = (weighted sum of option) – (weighted sum of do-nothing option)

• Plot cost vs. effectiveness

A manufacturing plant is faced with the loss of a hazardous waste disposal site. It is evaluating three strategies.

• Ship waste to a distant site.

• Construct major in-plant changes to reduce hazardous waste generation.

• Rebuild the plant using a new process that does not generate hazardous waste.