Abstract
This chapter focuses on the financial analysis factors for a pollution prevention (P2) project. There are four financial analysis factors—payback period, internal rate of return, benefit-to-cost (B/C) ratio, and present value of net benefit. The payback period of an investment is essentially a measure of how long it takes to break even on the cost of that investment. In essence, the importance of lifecycle costing is lost in using the minimum payback-time standard, because it only considers costs and benefits to the point where they balance, instead of considering them over the entire life of the project. The term return on investment (ROI) is defined as the interest rate that would result in a return on the invested capital equivalent to the project's return. The B/C ratio is a benchmark that is determined by taking the total present value of all of the financial benefits of a pollution prevention or P2 project and dividing it by the total present value of all the costs of the project. Finally, the present value of net benefits (PVNB) shows the worth of a P2 project in terms of a present-value sum.
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