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Running head: PLASTICS AND CANS RECYCLING PROJECT IN UMAS

Plastics and Cans Recycling Project in UMAS University


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PLASTICS AND CANS RECYCLING PROJECT IN UMAS


Plastics and Cans Recycling Project in UMAS University
Introduction
For over fifty years, the global production of plastic materials has continued to increase.
In 2013, more than two hundred and fifty five tons of plastic were made which represents four
percentage increases from 2012. Recycling and recovery measures put in place by the various
stakeholders however remain insufficient. This has lead to millions of plastics tons being
dumped inappropriately in oceans, rivers, and even in the open air (Lytle, 2016). Plastic
production has been increasing in growth to be the durable and the most economical storage
material replacing other materials such as glass and metal. A person of average standards in
Western Europe, North America and other areas near the two mentioned areas consumes one
hundred kilograms of plastic material each year. This is in form of packaging materials. In Asia,
an average person uses twenty kilograms per person. This figure is however expected to grow
rapidly as the Asian economy continues to grow.
A research conducted by the United Nations Environmental Program (UNEP), it was
established that between 22% and 43% of plastic materials used in the world was disposed in
landfills. Some of these materials recovered from the waste streams was recycled or combusted
to produce energy. It was also established that a large percentage of plastic materials recovered
from the waste streams were shipped to nations with low environmental regulations such as
African countries (Liine, 2016). Combustion of plastic material for energy production however
led to other environmental problems since hazardous ash produced was not disposed correctly.
Burning of plastic materials also led to air pollution.

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

The United Nations, Europe and some other countries have developed a collection system flow
in China. The system receives more than 56% of plastic materials used worldwide. Indirect
evidence also suggests that most of the imported plastic materials are reproduced by use of low
tech, family based facilities which does not have any environmental protection controls. The
evidence also revealed that plastics of low quality, which could not be reused, were disposed off
or used for energy production in industries which however lacked air pollution control systems.
Since 2010, a collaboration of The Green Fence Operation and Chinese Government started to
work together so as to reduce the amount of unregulated facilities.
Approximately ten to twenty million tons of plastic materials results to being disposed in
oceans each year. A study conducted recently established that 5.25 trillion of plastic material
amounting to an average weight of 268,940 tons floats in the world oceans (Wong, 2016). This
has lead to 13 billion losses each year due to damage of the marine ecosystem. Among these
losses are financial losses due to decline in fishing and tourism. Another amount is lost in terms
of time and resources used in cleaning the beaches (Garmelon, 2016). It is therefore important to
weigh the environmental and social benefits against the complications that results to high volume
of waste deposits in the various areas of the world. Control of pollution due to plastics should
therefore deserve a global attention.
Campaigns against plastic pollution should be established in all sectors starting from the
early childhood development across all levels of education so as to educate children on the
dangers of plastic pollution and the methods that may be put in place to control this kind of
pollution. These campaigns however can be effective if the dangers of plastic pollution are put in
broad light. The various activities conducted by firms, organizations, industries, the government
and individual persons that lead to plastic pollution should be exposed. The children should be

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

educated using practical means on how to control this kind of pollution. Projects to control this
kind of pollution should be set at school levels so as to teach children not only on the
environmental dangers of plastic pollution but also on the adequate ways and measures that can
be put in place to control or even eliminate plastic pollution.
Project description
A close examination of UMAS University and its environments revealed that the
university has challenges of both plastic paper and plastic can pollution. These papers were as a
result of plastic paper being used as storage facilities. Plastic cans were also found scattered in
paths used by students, in the dining areas, around canteens and the accommodation areas. Due
to this, it was established that it was necessary to establish a small recycle firm in the university.
The first step would involve establishment of plastic material collection sites by fitting bins in
strategic places within the university such near food collection sites and in lecture rooms. The
bins would be in various sizes from small size, medium sized and large sized so as to cater the
requirements of each plastic collection site. It would also be necessary to hire employees. The
job category for these employees will be based on the level of proficiency which include
unskilled, semiskilled and skilled. The bases of salary determination will be based on the level of
proficiency. The firm will be located within the university. The unskilled employees will be two
and their main work will be to gather the waste located in the bins in a central area. They will
also sort these materials. The semiskilled will be two in number while there will be only one
skilled personnel. They will work together in the recycle firm.
However, certain aspects raise themselves in the establishment of any business. It is
important to financially analysis the project profitability using the various financial ratios such as

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

internal rate of return (IRR) and the net present value (NPV). It is however important to consider
the problem being approached. Will the project sufficiently control plastic pollution in the
university? Do the benefits from the project overweight the cost of establishment of the project?
The Project Budget

Expenses
Legal
Stationary
Mailing services
Process funding
Office equipment
Bin installation cost
Transport
Labor
Total startup
expense
Startup assets
Cash required
Other short term
assets
Long term assets
Total assets
Total requirement

Amount
($)
500
300
200
400
2000
200
100
700
8800

10000
700
1000
11700
20500

NPV and IRR Computations


In order to evaluate whether this investment is worth the venture, the Net Present Value
(NPV) and the Internal Rate of Return (IRR) of the investment are to be computed. The NPV is
mainly used for capital budgeting to analyze the profitability of a projected investment while the
IRR is used to evaluate if the discounting rates on cashflow are attractive as compared to other
investment opportunities (Brigham & Ehrhardt, 2013, p. 402-404). By use of NPV, it is possible

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

to compare the cash outflow and the cash inflow of the project and determine the attractiveness
of the project. From this project, it is expected that other than the project playing a significant
role in improving the environment by facilitating recycling of plastics and cans within the
institution, the project will also be yielding profits for the institution. This will be mainly through
selling of the collected and sorted plastics and cans to firms that buy used plastics and cans for
recycling purposes.
i)

NPV Computation
The total startup expenses for the project are $8,800 and the total startup asset

requirement for the project is $11,700. The total of the investment is thus $20,500. The project is
expected to run for 4 years. It is expected that for the 4 years that the investment will run before
assessing if there is another better opportunity, the project will have earned $5000 for the first
year, $6,000 for the second year, $8,500 for the third year and $8,000 for the fourth year. The
discount rate of for the these returns are approximated to be 5%, based on the opportunity of
investing the capital elsewhere.

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

From the acquired information, it is noted that by discounting the investment at the rate
of 5%, we would be paying less than the project is worth. This is indicated by a positive NPV
value of approximately $3,628. As such, a higher rate of interest is required in order to discount
the cashflows in a way that is more attractive to the firm. This necessitated the computation of
the IRR from excel as indicated in the figure below.

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

ii)

IRR Computation

From the above figure derived from excel, it is noted that in order to have a NPV of zero which
would be most attractive for the firm, it rate of discounting the cash flow is even much higher
than the initially estimated interest rate, which was 5%. From IRR computations using excel IRR
function, the IRR of this project is noted to be 11.748906%. With this rate discounting, the NPV
is approximately zero which more attractive to the firm. This makes the project more feasible for
investment.

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

Other Considerations to be Made


Despite the fact that this project has great potential of significant returns on investment, it
is still feasible from other non-financial grounds. As indicated earlier on, the main aim of the
project is to make a positive impact to the environment by facilitating more recycling of plastics
and cans. These two environment polluters have had very adverse effects to the environment
such interfering with natural habitats especially for marine life and acting as a soil polluter.
Without effective ways of ensuring that such plastics and cans are recycled, the also degrade the
aesthetic value of the environment in the city, at the beach and also in some parts of the UMass
institution where the trash is often assembled for collection.
The project will also act as a part of corporate social responsibility, where a major
objective of the project is to improve the improve the environment. By facilitating more plastic
and cans recycling, the institution will have played a positive role in addressing the issue of
environmental pollution, especially by considering that the high student population leads to
increased usage of plastics and cans and thus the plastics and cans waste from the institution are
significantly high. The two factors make the project even more worth the investment.
Conclusion
From this analysis, it is confirmed that the project is an attractive investment to the
institution. This is indicated by the computed NPV and IRR for the project. Not only will it yield
profits for the firm, but it will also have a positive impact to the environment. The evaluation
period is however set to four years to enable re-assessment of the project, as new investment
opportunities come up that will need to be compared against this project.

PLASTICS AND CANS RECYCLING PROJECT IN UMAS

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Reference
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory and practice. Mason,
Ohio: South-Western.
Garmelon, G. (2016). Global Plastic Production Rises, Recycling Lags | Worldwatch Institute.
Worldwatch.org. Retrieved 27 April 2016, from http://www.worldwatch.org/globalplastic-production-rises-recycling-lags-0
Liine, M. (2016). plastic pollution. hot mail online. Retrieved 26 April 2016, from Garmelon, G.
(2016). Global Plastic Production Rises, Recycling Lags | Worldwatch Institute.
Worldwatch.org. Retrieved 27 April 2016, from http://www.worldwatch.org/globalplastic-production-rises-recycling-lags-0
Lytle, C. (2016). Plastic Pollution. Plastic-pollution.org. Retrieved 26 April 2016, from
http://plastic-pollution.org/
Wong, C. (2016). Retrieved 26 April 2016, from
http://www.ciltuk.org.uk/portals/0/documents/pd/seedcornwong.pdf

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