Revenue/operating cost consideration

Two small commercial incineration facility designs are under consideration. The first design involves a liquid injection incinerator and the second a rotary kiln incinerator. For the liquid injection system, the total capital cost (TCC) is 2.5 million, the annual operating costs (AOC) are 1.2 million, and the annual revenue generated from the facility R) is 3.6 million. For the rotary kiln system, TOC, AOC, and R are 3.5, 1.4, and 5.3 million, respectively. Using straight-line depreciation and the discounted cash flow method, which design is more attractive Assume a 10-yr facility lifetime and a 2-yr construction period. Note that the solution involves the calculation of the rate of return for each of the two proposals. 

Whole-life costing (WLC) Synonym to TCA (I) or LCC (Sterner 2002). More specifically designed by (Clift and Bourke 1999) as The systematic consideration of all relevant costs and revenues associated with the acquisition and ownership of an asset (1) Initial costs and (2) operational costs... 

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