cp gp day03 session 10 - feasibility of cp options
TRANSCRIPT
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Feasibility Evaluation of Cleaner Production Options
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Select workable CP opportunities
Categorize options into:1. Implement obviously feasible options
2. Reject obviously non-feasible options
3. Remaining options - conduct feasibility analysis
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Feasibility of CP options
Technical feasibilityFinancial feasibility Environmental feasibility
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Technical feasibilityAvailability and reliability
of equipmentRequirements for utilities,
process monitoring and control, space etc.
Maintenance requirements
Operator and supervisor skills
Ease of retrofitting into existing system
Projected material balance
Projected energy balance
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Assess technical feasibilityConsumption Rates: Before implementation After implementation Inputs: raw materials labour energy water etc. Outputs: products solid waste wastewater Gaseous emissions etc.
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Parameters Weight Score Weighted Score
Level of meeting specifications
3 5 15
Availability and reliability of after sales service
2 2 4
Utility requirements
2 3 6
Availability of auxiliary equipment
2 3 6
Compatibility with other systems
2 4 8
Total 3905/01/23 6
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If technically not feasible,
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Reject the optionNot necessary to evaluate financial and environmental feasibility
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Assess financial viability
Consists of:1. Data collection:investments;operational costs & benefits
2. Choice of economic criteria3. Economic calculations
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Assess financial viability
Data collection (from technical evaluation):
1. Investment:equipment, construction, training, start up etc.
2. Operational costs and benefits:before and after comparison
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Operational costs and benefitsElectricityMan powerChemicalMaintenanceTraining costInterest and
depreciation
Direct savings (tangible benefits)
Indirect savingsTreatment costDisposal costHealth and safety
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Timing of Cash Flows
Workingcapital
Annual Operating CostsAnnual Tax Payments
Annual Financing Payments
Salvage ValueEnd of project:
Time zero:
Initial InvestmentWorking Capital
TIMEYear 1 Year 2 Year 3
Annual Revenues/Savings
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Profitability IndicatorsA profitability indicator, or “financial indicator”, is: “a single number that is calculated for characterisation of project profitability in a concise, understandable form.”Common examples are:
Simple PaybackReturn on Investment (ROI)Net Present Value (NPV)Internal Rate of Return (IRR)
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Simple PaybackThis indicator incorporates:
the initial investment cost the first year cash flow from the project
Simple Payback (in years)
Initial Investment
Year 1 Cash Flow=
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How to Interpret Simple Payback
The simple payback calculated for a project is usually compared to a company rule of thumb called a “hurdle” rate:
e.g., if the payback period is less than 3 years, then the project is viewed as profitable
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The Time Value of Moneyand
Net Present Value (NPV)
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Question:
If we were giving away money, would you rather have:
(A) $10,000 today, or(B) $10,000 3 years
from now
Explain your answer...
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InflationMoney loses purchasing power over time as product/service prices rise, so a dollar today can buy more than a dollar next year.
costs $1 costs $1.05
inflation 5%
nownow next yearnext year
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Investment OpportunityA dollar that you invest today will bring you more than a dollar next year — having the dollar now provides you with an investment opportunity
Interest, or “return on investment”
Investing $1 now
InvestmentGives you
$1.10 a year from now
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Present Value Factors Value of $1 in the future, NOW
Discount rate (d): 10% 20% 30% 40% Years into future (n) 1 .9091 .8333 .7692 .7142
2 .8264 .6944 .5917 .5102 3 .7513 .5787 .4552 .3644 4 .6830 .4823 .3501 .2603 5 .6209 .4019 .2693 .1859 10 .3855 .1615 .0725 .0346 20 .1486 .0261 .0053 .0012 30 .0573 .0042 .0004 .0000
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Net Present Value (NPV) Net Present Value (NPV) = the sum of the present values of all of a project’s cash flows, both negative (cash outflows) and positive (cash inflows)
NPV characterises the present value of the project to the company
If NPV > 0, the project is profitable
If NPV < 0, the project is not
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Environmental evaluation
Comparison between the current material balance and the projected material balance
Reduction in quantity of wasteLess hazardous materialsReduction in energy lossesReduction in water consumptionReduction of material consumption
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Selection of feasible options
Tabulate the results of technical, economic and environmental evaluations
Eliminate technically non-feasible optionsEliminate options without significant net
environmental benefitCombine the results to rank the options
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Weighted matrix method
Technical Feasibility - 25 Low: 0 – 5Med: 6 – 14High: 15 – 25
Economic Viability - 50 Low: 0 – 10Med: 11 – 29High: 30 – 50
Environmental Feasibility 25 Low: 0 – 5Med: 6 – 14High: 15 - 25
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Weighted matrix method
Technical – cannot be negativeEconomical – can be negativeEnvironmental – no option should be
negativeRanking – prioritize according to your
needs
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Thank You!