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Engineered Products Inc. (EPI) is a conglomerate with both manufacturing and service-based businesses.

One of EPIs larger manufacturing plants has been asked to increase its recycling efforts or face a major increase in its disposal fees. The plant works 5 days a week, 50 weeks a year, 20 days a month, 240 days a year. The minimum attractive rate of return is 15%.

Currently, the plant averages sending 2 containers per day to the landfill. The containers average 10 tons of waste when loaded. 2 containers = 20 tons In the future, the average weight per container would increase to 11 tons 2 containers = 22 tons The local landfill plans to increase disposal fees by $5 per ton. It is offering to rebate $5 for each ton less than thecurrent 12-month average that the plant sends to the landfill. Currently 4800 Tons Per 12 months In the future 5280 Tons Per 12 months Difference 480 Tons Per 12 months Increased disposal fees -2400 $

Per 12 months

-4800 $

A year

The landfill charges $40 per ton to receive the waste -800 $ A day In the future -880 $ A day

-192000 $

A year

-211200 $

A year

The waste hauler charges $80 per load (one container) to transport the waste. The three waste containers are rented for $5 per container per day. -160 $ A day = -38400 $ -10 $ A day = -2400 $ Currently, cardboard, if collected and bundled for shipment, can be sold for $95 per ton The plant estimates that it sends 2 tons of cardboard a day to the landfill. 190 $ A day = 45600 $

A year A year

A year

To collect the cardboard will require one janitorial associate for 3 hours per day at a cost of $18.50 per hour. -55,5 $ A day = -13320 $ A year The baling equipment will cost $22,000 installed, $45 per week to operate, $4500 per year to maintain, and last 12 years. The equipment will have a salvage value of $5000. -6750 $ A year = -8166,67 $ A year -22000 $ 0th year 5000 $ 12th year Currently, 25,000 wooden pallets per year are scrapped each year because they are

damaged or because they are not of the standard size used by the plant. The plant has budgeted $12,000 for a pallet shredder to chip the pallets as they go into the waste containers The pallets average 13 pounds each. 1 ton = 2240 pounds The operating and maintenance cost (not including the operator, a janitorial associate) is $3000 per year The shredder has no salvage value at the end of its 6-year useful life -12000 $ 0th year -12000 $ 6th year -3000 $ A year = -5000 $ A year 145,089 Tons A year A pallet recycler has offered to purchase pallets, which are of certain sizes and in good condition. The pallets that are in these sizes and in acceptable condition amount to half the scrapped pallets. The pallet recycler is offering to pay $1.00 per pallet. To sort the acceptable sizes from the scrap pallets will require three hours of labor per day. 12500 $ A year = 12500 $ A year -55,5 $ A day = -13320 $ A year Purchasing has identified a company that will pick up the damaged and unusable pallets them into wood chips, which this company then sells. The cost of this service is $1.25 per pallet. -15625 $ A year Total cost 312231,7 Total benefit 58100 IRR -4,37404 % What do you recommend the plant do? Do nothing $ $ A year A year