APPENDIX 2




Cost calculations were conducted by net present worth analysis (then amortization) on the figures provided in McArthur's thesis. This was considered to be reasonable given that the largest cost would be that of the consumable (lime) which has not changed in price from 1970 to now (considering inflation).

To calculate inflation, three price indices were used: the consumer price index (CPI), the farm price index (FPI) and producer's price index (PPI); an average of these values were taken to be the average inflation rate for industrial but readily consumer-available items. The inflation rates were calculated by the standard price index inflation rate equation:




Price Indices
Index Dates Price Index Inflation
Consumer Price Index Oct. 1970 118.5 -
- Sept. 1998 491.3 5.21%
Farm Price Index Oct. 1970 48.4 -
- Oct. 1998 87.8 2.15%
Producer's Price Index Oct. 1970 37.1 -
- Oct. 1998 124.0 4.40%
Average 3.92%



For the neutralization facility (that consists of a drum in-stream that acid water is fed into, treated, then released), McArthur's capital costs were moved forward in time, as were the lime costs (the lime cost amounts to approximately US$22/ton, which appears to meet current-day costs, given the local materials available). The net present value (NPV) was calculated by


NPV = Past_value(1 + i)N



where N is the number of years between 1970 and 1998, at the given inflation rate. This yielded:


NPV = $11140(1+0.0392)28 = US$32693



Using the new water quality data, eight neutralization facilities would be required. Similarly, the lime required using the new water quality data was calculated to be 107 tons for a total of US$2324 per year.

The capital costs were then spread over 20 years using an average 7% interest rate for the 20 years. This was done using the amortization formula:





Assuming an annual operations cost of US$15,000 for a part-time operator and US$1000 for miscellaneous expenses, the final annual cost is:





The cost of the land was calculated in the same fashion:


Calculation of Land Areas to Purchase
Area (acres) Type Cost/acre Total Cost
3964.5 Grain Crop Land 1500 5946750
5.6 Mine Dumps 800 4480
5.3 Developed Land 80000 424000
1877 Alfalfa Crop Land 1600 3003200
12496.4 Pasture Land 500 6248200
Total US$15,626,630



The cost was then amortized over 20 years:





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