Question: As a byproduct of its manufacturing process, Technocel, Inc., generates 100 kg of highly toxic waste per year. Currently Technocel pays Enviro-serv, a waste management service, $15 per kg to remove and treat the waste. Alternatively, Technocel could treat and dispose of the waste for $5 per kg, if it installed a $4000 on-site treatment reactor. The estimated life of the reactor is five years, and it would have no salvage value. Technocel before-tax minimum attractive rate of return is 20%.
a) Compute the difference in annual equivalent cost of the two alternatives and select the more economic alternative.
b) Compute the annual mass of toxic waste above which on-site treatment is the more economic alternative.