Question

A community wants to construct a hazardous waste incinerator for household hazardous waste. The cost of the facility is expected to be $4,000,000. The cost of operating this facility is estimated to be about $20,000 per year plus salaries of $100,000 annually. The insurance on the facility will be $3,000 per year. What is the annual cost of this facility to the community? Assume that the facility will have a useful life of around 15 years.

Answer 1

cost of the facility = $4,000,000

The cost of operating per year = $20,000

annual salary expenditure = $100,000

Insurance expenditure per year = $3,000

Useful life of facility = 15 years

So, total cost of the facility for the period of 15 years = $ 4,000,000 +($ 20,000 + $ 100,000 + $ 3,000) * 15

= $ 5,845,000

So, annual cost = $ 5,845,000/15 = $ 389,666.67

Answer 2

I would include that, set up cost, plus if the money is borrowed the interest, if from capital, the loss of interest. Don't forget the decommissioning costs plus inflation at the end