Environmental Engineering Reference
In-Depth Information
REFERENCES
Clearly, management must now use their judge-
ment, which cannot be substituted by any model,
on which project to select.
Some would argue that selecting project (i)
adopts a short-term approach, while others would
argue that adopting project (ii) could deny the
company the opportunity to invest in newer re-
placement technologies earlier, i.e. in seven years
rather than fourteen years. If the company could
invest the difference between the capital cost of
the two project (i.e. $1,381,000) in a mutually
exclusive project to that of project (ii) and produce
a NPV in excess of $1,211,000, (at this figure
giving a DPBI of less than two) then this would
also favour the selection of project (i).
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CONCLUSION
Environmental sustainability is a subject of great
contemporary importance. We have highlighted
relevant environmental characteristics of some
capital projects and applied the financial ap-
praisal profile approach to their evaluation, which
is supported by a case study example. We have
described and shown how these factors can be
integrated into a comprehensive evaluation of
projects with significant environmental implica-
tions. We believe that this method helps fill a gap
in the environmental investment literature where
there is a paucity of comprehensive, structured,
and transparent methodologies that can prove ac-
ceptable to management decision-makers from a
variety of functions and viewpoints. However, we
need to reiterate at this point that the FAP model is
an aid to management decision-making and not a
substitute. We do not attempt to combine financial
and non-financial factors into a single cashflow
figure and accept that ranking of multiple criteria
is not a straightforward process. For these reasons,
we show the results of our analysis as a profile
and leave management to make the final decision.
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