Reference no: EM132516330

An aluminium refinery in Gladstone is planning to implement an environmental management project. The project is to purchase new equipment that will lower operating costs and reduce emissions from the refinery, which are currently spread over nearby residential districts.

                                                 Additional costs                   Cost savings                   Reduction in emissions

(tonnes of airborne particles)

Initial outlay $578 000

Year 1                                   289 000                            $41 000                                    50

Year 2                                   260 000                            41 000                                       50

Year 3                                   250 000                               41 000                                     50

Year 4                                  250 000                               41 000                                      50

Year 5                                   250 000                                   41 000                                50

It is estimated that each tonne of emissions currently causes health costs that average $2 per annum for each of Gladstone's 50 000 residents.

Required:

Question 1. Calculate the net financial cost to the refinery of investing in the new equipment.

Question 2. Calculate the financial cost or benefit to the community over the five years.

Question 3. What other information might you need to gather in order to undertake a more comprehensive analysis of the project?