Lets assume 2 competing project designs are being evaluated: a traditional design versus a design for recyclability approach. For simplicity, we assume each takes 1 year to design and construct, each is operated and maintained for 2 years, and each is decommissioned in year 4. The life cycle cost for each design, expressed as net present value (NPV), to the sum of the annual cost(s) for each year of the life of the project, discounted for the time value of money, or interest rate is expressed as follows:

The design and construction cost is $5,900,000 for the traditional design and $7,000,000 for the design for recyclability approach; annual operating costs are $5,200,000 for both designs; and decommissioning costs are $2,200,000 for the traditional design and $1,200,000 for the design for recycling approach. The interest rate is 9%. Which project should the company support?

• A.

  Not able to determine

• B.

  Neither

• C.

  The design for recyclability

• D.

  The traditional design