Costafortune Coffee plc is reviewing its' supply of cups to its 2,400 UK outlets. The total number of cups used per year in its shops is 650 million. The cost of its cup is currently £1.80. It has recently committed to pay the recycling mill company an extra £70 per tonne (from its current £50 per tonne) for cups recycled, making a total of £120 per tonne. It expects to recycle an average of 500 million cups each year for the three-year trial period. On average there are 100,000 cups in each tonne of waste for recycling. Initial financial analysis indicates that by investing in the development of a non-plastic cup with a replacement lining it will cost £200,000 to develop and the cost per cup will increase to £1.85. It will however mean that the company would not need to supplement the fee per tonne for the recycling mill, which will revert to only £20 per tonne to recycle 500 million cups as the recycling process will be less complex. The company opportunity cost of capital for this project is 10%. 

What is the net present value for Costafortune Coffee plc switching from its existing plastic cups and recycling arrangement compared to the development of the new non-plastic cup over the next three years?

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To calculate the Net Present Value NPV for Costafortune Coffee plc s decision to switch from its existing plastic cups and recycling arrangement to th View the full answer