Investments and Risks For Sustainable Development

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Investments and risks for sustainable development

Lector univ.dr. Cristian Silviu BANACU
Dedication
Cuprinsul crii:
Chapter 1
Introduction in investments theory and practice for sustainable development
1.1 The concept of investment
1.1.1 Investments definition
1.1.2 The concept of efficiency and effectiveness of investments
1.1.3 Investments for sustainable development and the new economy
1.2 Investing in product eco-design
1.3 Investing in sustainable production. The evolution of the sustainable production
concept
1.3.1 Technical and economical demands for investing in production systems
1.3.2 Good examples of sustainable development models. The Dutch approach
1.4 Review the literature
1.5 The aim of the investment course on sustainable development bases
1.6 Summary and recapitulation
file:///D|/Master/ASE/cursuri/05/Investments%20and%20risks%20for%20sustainable%20development.htm (1 of 5)29.12.2007 18:42:11
Chapter 2
Measures to support investments in sustainable production
2.1 Introduction
2.2 Technical measures
2.2.1 Technical-time measures
2.2.2 Utilization
2.3 Technical
2.3.1 Technical efficiency
2.3.2 Real machine capability
2.3.3 Technical Productivity
2.4 The Transformation Factor
2.5 Economical measures
2.5.1 Productivity as an economic measure
2.5.2 The value of technology
2.6 Ecological measures
2.6.1 Measures for ecosystems and land use
2.6.2 Measures for assessment of forests and pastures levels
2.6.3 Measures that take into account the biological diversity
2.6.4 Measures for water resources assessment
2.6.5 Atmosphere pollution and its effects on climate changes
2.6.6 Raw materials and energy resources
2.7 Technical-Economical measures
2.7.1 Quality as a technical-economical measure
2.7.2 Quality as a technical-economical-ecological measure
2.7.3 Flexibility as a technical-economical measure
2.8 Complex measures
2.8.1 The Transformation Factor as a complex technical, economical and ecological
measure
2.8.2 The economical assessment of the investment in production processes by using the
Transformation Factor
2.8.3 The ecological assessment of the investment in production processes by using the
transformation factor
2.9 The technological-economical-ecological measures: The Sustainability Factor
2.10 Benchmarking values for Sustainable Production Systems of different industries
2.11 Conclusions
Chapter 3
Investments in sustainable products, the life-cycle approach
3.1 The life-cycle assessment for products and processes; a technical, economical,
ecological overview
3.2 Life-Cycle Technical Analyses (LCTA)
3.2.1 Life-Cycle Technical Analyses (LCTA) for products
3.2.2 Life-Cycle Technical Analyses for production processes
3.3 Methodology of assessment of life cycle process

Chapter 4
The product life cycle costing a tool for feasible eco-products investments
4.1 Life-Cycle Economical Assessment (LCEcA)
4.2 The product life-cycle environmental assessment
4.3 Product life-cycle human social impact assessment
4.4 Conclusions
Chapter 5
Investments in sustainable production for housing; designing the methodology for
implementation
5.1 Introduction
5.2 Sustainable industrial production for housing; The concepts and definitions
5.3 Market influences on housing industry
5.4 The house as a product
5.5 Processes for housing; needed conditions for sustainability
5.6 Production management for housing
5.6.1 Actors of the housing industry
5.7 Building a methodology for Sustainable Housing Production
5.7.1 The background
5.7.2 The life-cycle analyse for housing
5.8 The recycling-housing technologies between demolishing and deconstructing
5.9 The feasibility analyse of production processes for housing
5.10 Conclusions
Chapter 6
Types of investments for sustainable development
6.1 Introduction
6.2 Project investments
6.3 Project definition
6.4 The necessity of programs and project investments
6. 5 The programs
6.6 Program classification
6.7 The programs system approach
6.8 Projects
6.8.1 The project system
6.8.2 Project documentation sub-system
6.8.3 The project investments result sub-system
6.9 Tipology and structure of project investment
6.10 The project management of investments
6.10.1 The project scope
6.10.2 The project objectives
6.10.3 Field criteria

6.10.4 Cost criteria
6.10.5 Time criteria
6.10.6 Quality criteria
6.11 The marketing mix of investment projects
6.11.1 The project as a product
6.11.2 The projects market
6.11.3 Project price
6.11.4 Promotion and publicity for projects
6.12 Conclusions
Chapter 7
The time factor in investments
7.1 The influence of time on investments
7.2 The discounting technique
7.2.1 The calculus of discounting indicators
7.2.2 The reference moments for discounting
Chapter 8
Bank indicators for feasibility studies and business plans
8.1 The role of national and international financial institutions in Romania s economic
transition and integration in European Union
8.2 Methodologies for investment project evaluation of international and national financial
institutions (I.B.R.D, E.B.R.D.)
8.3 Feasibility studies and business plans structure and characteristics
8 .3.1 Opportunity studies
8.3.2 Pre-feasibility studies
8.3.3 Feasibility studies
8.3.4 The evaluation report
8.4 Economic and financial analyses for the feasibility studies and business plans
8.4.1 The investment costs assessment
8.4.2 The analyse based on centers of cost
8.5 Financial analyse of investment projects
8.6 Bank indicators to assess the feasibility of project
8.7 Conclusions
8.8 Themes to be solved by the students
Chapter 9
Risk and uncertainty analyse for investment projects
9.1 The necessity of risk and uncertainty analyses
9.2 Economic criteria to analyse uncertainty and risks for investment projects
9.3 Sensivity analyse
9.4 Forecasting methods for investment projects
9.5 Conclusions
9.6 Themes for students
Chapter 10
Instruments to assist decision making for investment projects
10.1 Introduction
10.2 The CSB graph
10.3 Computer Expert System for CSB
10.4 Conclusions
10.5 Bibliography
Chapter 11
Investments in research and development (R&D) projects for sustainable development
11.1 The importance of investments in research and development projects
11.2 Indicators for feasibility analyses in research and development activities
Annex 1 Union policy on environment and sustainable investments
Annex 2 Factors used in investment projects
Annex 3 Indicators
Bibliography
Cuprinsul studiilor de caz:
Chapter 12
Study case for sustainable investment project selection
Dedication
I dedicate this book to Professor Ph.D. Ion Vasilescu and also to the Academy of
Economic Studies of Bucharest, to Magister Professor Ph.D. Peter SCHMID from
University of Technology Eindhoven (The Netherlands), to Professor
Ph.D. Fernando BRANCO from Instituto Superior Tcnico, Lisbon, Portugal.
Acknowledgement
The book was published with the support of the Academy of Economic Studies of
Bucharest and with the information and knowledge acquired during my doctoral
stages in the Netherlands (at TUE in 1995).
I want to thank to the institutions that supported my grants which made possible the
concepting and the publishing of this book.
I thank to:
The Academy of Economic Studies of Bucharest, Romania
NUFFIC (The Dutch Organization for University International Relationships)
An important support also came from the CNCIS Programme Celula de infovideo-comunicare pentru nvmntul la distan (director lector dr Cristian
Silviu BNACU) and Sinergetica sistemelor tehnico-economice, (director prof.
univ. Ion VASILESCU).
The author
Bucharest
24.06.2004
Chapter 1
Introduction in investments
theory and practice
for sustainable development
The concept of investment

Investments definition
The concept of efficiency and effectiveness of investments
Investments for sustainable development and the new economy
Investing in product eco-design
Investing in sustainable production. The evolution of the
sustainable production concept
Technical and economical demands for investing in production
systems
Good examples of sustainable development models. The Dutch
approach
Review the literature
The aim of the investment course on sustainable development bases
Summary and recapitulation
1.1 The concept of investment

In every day life we very often hear a word: investment related to someones
intention to do something. For instance, it is usually for someone to say: Ill make
an investment by buying a property or a car. Others say: my investments are my
kids, their education and achievements. The Public administrations managers and
leaders are talking about investments into infrastructure development or sustainble
investments. The capital marketsbrokers are also talking about investments.
The question is: The investments have the same semantics for all the people
mentioned above? The answer might be yes and no as well.
The yes stands for the fact that the investments must bring a certain benefit either
economic, called profit, or other benefits (environmental, social, technical etc.).
It means that only the spendings in assets (tangibles or intangibles) or services

which are able to generate profits or other benefits could be considered
investments. From this point of view, the properties (lands and buildings) are
considered investments only if they are a support for production or services
activities on profit bases (incomes is greater than spendings) or if they are for rent,
bringing an income greater than spendings.
The no stands for the idea that we dont consider our house or car as an investment.
These are spendings for our living needs or for the improvement of our life
standard.
Our car or house becomes an investment if it brings an income (car used as taxi,
house and land for rent etc.).
Other aspects about investments are related with the intangibility characteristics. A
good example are the investments in education or professional specialization. For
example, the parents and the society through public support system invest in the
education of their sons and daughters as your parents did for you, with the hope
that the youth will bring more knowledge and skills for their professions.
The government and the public administration are making investments in order to
develop the infrastructure or environmental rehabilitation that will support future
economic activities. In the case of education, health, environment and
infrastructure the investment are not judged from the economic profit point of view
but from the benefits brought by time. For instance, having better educated and
well skilled individuals a society could develop faster. A better transportation
infrastructure (roads, highways, ports, airports, bridges etc) that usually is the
subject of public investments represents the support for other economic profitable
activities within economy as production, trade, tourism etc.
Investments in health are beneficial for the general state of population health
knowing that healthy people are productive and have a low impact on public health
insurance budget.
So, we could give a definition for investment as it follows:
1.1.1 Investments definition
Investments are a present spending for a future gain either profit or other benefits
(ecological, social, technical, skills etc.) as mentioned before.
As a conclusion we relate the investments with the future in all that it concerns.
Therefore, we well use a new approach different from the classic one in which
only the economic profit prevails as a basic indicator. The new approach is to relate
investments with the sustainable eco-development concept and the new economy
based on the information society concept. That means to care about future and to
adapt to the change and to make the investments sustainable. This is not a fashion,
it is a reality that already is present in well developed countries. The European
developed countries, as the Netherlands, Sweden, Germany, Great Britain, France,
Norway, Danmark, Finland, Austria, Belgium, Portugal, Spain, etc. or other great
economic powers as USA, Canada, Japan, Australia, or transition economies as
China, Russia, Romania etc. are investing in their own economies on sustainable
development basis and putting the foundation for a new economy based on
information technology.
The non-classical approach, based on sustainable investments and new economy, is
necessary for Romania on its access to European Union economic integration.
1.1.2 The concept of efficiency and effectiveness of investments
The efficiency as a word is well known, too. It is coming from the latin word
efficere that means to do well what are you doing, at time and with optimum
consume of resources either human, material or financial. If we deal with the
economic efficiency of investments that means to put in balance efforts (financial,
human, technical etc.) with effects (gains as turnover, profit, production, services,
products, impact on enviroment etc.). For example, an investment in a building is
efficient if the time of completing and the return on investment(ROI) is fullfiled at
the desired time without any timedelays and resources overconsumptions.
e=
EFFECTS
1 where e = efficiency coefficient
EFFORTS
The efficiency coefficient e help us to select a variant of a project investment from

others taking as a base the ratio effects/ efforts there were seen as profit/ costs, for
instance, or products made / optimum quantity consumed resources.
Effectiveness is coming also from the latin word efficacere and means to do the
right thing, to do with the lowest consumption of resources either uman, material,
technical or financial. In a practical way it means that an investment is effective if
it is the most adequate for the purpose involved and it is done with the lowest (or
optimum) consumption of resources. For example, an investment in a building is
effective if the desired utility is fullfiled and the consumption of resources during
using is the most appropriate.
1.1.3 Investments for sustainable development and the new economy
The concept of sustainable development has emerged in the seventies due to the
general concern about the global environment, as a result of pollution and an
increasing usage of sources for raw materials and energy.
Sustainability means the rearrangement of technological, scientific, environmental,

economic and social resources in such a way that the resulting heterogeneous
system can be maintained in a state of temporal and spatial equilibrium (Brand,
1988), while a Sustainable Development is a development that meets the needs of
the present without compromising the ability of future generations to meet their
own needs (Brundtland,1987).
As a result of the definitions of a sustainable development, a sustainable
production can be defined as an industrial activity resulting products that meet the
needs and wishes of the present society without compromising the ability of future
generations to meet their needs and wishes. As a consequence of this definition, a
sustainable production will minimize the pollution of the global environment as
well as the use of natural sources of raw materials and energy. A possible way to
reach these requirements is by a continuos improvement of industrial activities
with respect to:
- reduction of energy usage of non-renewable energy sources,
- usage of recovered goods, parts and materials from discarded goods,
- sustainable product quality.
A sustainable production implies that all phases of the product are viewed with
respect to the requirements, from the exploitation of raw material and energy
sources until the recovery of materials, see figure 1.1.
In the chain, the different industrial activities can be distinguished:
- exploration of raw material and energy sources,
- transformation of raw materials into materials,
- product design,
- transformation of materials into products,
- recovery of goods, parts and materials.
To arrive at sustainability for the complete chain, each activity of the chain should
be sustainable. That means that three main activities of the chain have to be
optimised: product design, transformation and recovery.
The product design determines the material and energy usage of a product during
his entire life cycle and the percentage of recovery. During the transformation
activity, material and energy usage is depicted by the used processes and systems,
while this activity determines the product quality too. During recovery, the quantity
and quality of recovered goods, parts and materials are determined by the processes
and systems.

Research & Development of product and process
Materialproduction
Fabrication of
end-products
Selling &
Distribution
Wasteprocessing
Use
INPUT
OUTPUT
Waste
& Emissions
Raw materials
& Energy
REUSE & RECYCLING
Reuse during the production time stage
Reuse in the end-product

lyfe cycle phase
Reuse after
end-product
life cycle phase
Figure 1.1 The various phases of a product
Product and production belongs to each other and are coupled on the technology:
product-technology-production. Innovations are obtained by new technological
opportunities while demand is dictated by the market.
Because of the given relation, the choice of the technology is very important, not
only technically but also economically, ecologically and socially.
This is summarised in table 1.1 which gives a product / technology matrix, divided
to the aspect: known, new, unknown.
Table 1.1 Product / Technology matrix
technology
product
known
known
new
unknown
new
unknown
2
product
development
4
product
development
production
process
development
research
Manufacturing a known product with a known technology (section 1) does not give
risks but the lowest profit rates.
Production of new products, which means products which have not been
manufactured before, is more difficult. If these new products are manufactured by
means of a known technology the risks can be overseen. Examples can be found in
the automotive industry and all other branches of industry where product
innovation is applied. Mostly it concerns product redesign and not a totally new
product. In order to improve the efficiency of production process, new technologies
are used to manufacture a known product. This strategy is applied to reduce the
costs (less energy, less waste, less labour, less pollution). Besides, the effectivity
can be improved by means of a higher product quality. For instance, an industrial
automation results in a better quality because of a better process control.
Manufacturing of new products by a new technology will give high risks. An
example is the manufacturing of mega-chips.
To arrive at a sustainable product, mostly the product has to be redesigned, as this
phase depicts the material usage and environmental load during the entire life
cycle. The technology is known as a sustainable production requires a continuos
improvement of efficiency and effectivity.
For a company, the reduction of materials and energy by applying sustainable
production techniques may result in decreasing production costs and indirect costs
as a consequence of the avoidance of a polluting production and low quality
products and processes. Furthermore, the company will be more competitive
because the market will demand for sustainable products in future.
In the next sections, known technologies are described to arrive at a sustainable
product design and a sustainable production. Furthermore, ways are given to
introduce the sustainable production concept in the industry. But before the
introduction, the market demand for sustainable products and the society demand
for a sustainable production is indicated.
1.2 Investing in product eco-design
The product design is important for all activities in the chain in order to create an
integral chain control with respect to a sustainable development.
Almost all limitations are the result of the product design.
A product eco-design can be defined by:
- the development of products where, in the design decisions, an integral chain
control is weighted equally compared to more traditional quantities, like
economics, quality, functionality, aesthetics, ergonomics, innovation, and
image, in such a way, that the potential influence of the products upon the
environment and the material and energy sources is reduced significantly
(derived from the definition of an environmental friendly design by Brezet et
al., 1994).
To create a sustainable investment, the choice of the materials and the way the
product structure has been composed, are very important.
Therefore the following activities should have a high priority for the product ecodesign:
minimal usage of virgin materials,
minimal energy consumption during the production and usage periods,
usage of materials which can be recovered easily,
eco-design with easy to divide materials,
easily disassembled or dismantled oriented product design,
eco-design so that parts and the product have long life cycles.
The aim is to have the requirements with respect to sustainability from the
beginning of the design phase, using concurrent engineering and concurrent
economics: a systematic eco-design of products and the processes needed for their
production, where all elements of the product life cycle are considered by a
multidisciplinary designers team, from the concept until the disposal phase,
including quality, costs, planning, productibility, users demand, maintenance and
environmental requirements (Constance, 1992).
New views like the environmental requirements can be handled systematically in
the design phase, e.g. by applying QFD (Quality Function Deployment) to translate
the market demands into a design of a green product.
1.3 Investing in sustainable production. The evolution of sustainable production
concept
The purpose of production, at least idealistically, is to enrich society through the
production of functionally desirable, aesthetically pleasing, environmentally safe,
economically affordable, highly reliable, top-quality products.
These noble objectives are often conflicting for economic reasons.
Since the first use of machine tools there has been a gradual trend towards making
machines more efficient by combining operations and by transferring more skill to
machines.
Technical development has made it possible to attain high productivity rates which
are essential for any society willing to enjoy high living standards.
Until the sixties, all that was produced, was sold, because of the seller's market.
Although the price was important to increase the market share, the pressure to the
prices was not extremely as the profits in that time show.
However, as the seller could choose more and more between various producers, the
price became an important weapon.
In the past, it was tried to obtain an efficient organisation in order to have a higher
production output. But now the price pressure requires an efficient organisation in
order to reduce the cost price. To be competitive, management focused on
reorganisations and transferring the production to low wages countries.
At the beginning of the seventies, the buyer became aware of the quality of the
product. As a part of the industry, and especially in Japan, offered products with a
high quality for low relatively low prices, together with efficiency, quality became
an important aspect to stay competitive.
At the end of the seventies, the seller's market changed into a buyer's market.
Therefore the battle for the attention of the buyer became more difficult. Especially
Japanese firms increased their product assortment and shortened the life time of a
product. The buyer liked the choice he could make now and showed this in buying
this kind of products.
So, besides being efficient and producing with a high quality, product assortment,
delivery time and the look of a product became very important.
This all resulted in a tremendous time pressure: companies had to introduce faster
new products to the market, so that the development times has to be reduced, while
the products had to be delivered faster. So the company had to be flexible too.
To fulfil the requirements, the companies have introduced cost awareness, quality
programms and techniques to become more flexible. This should be handled as a
continuos process of improving. The cost awareness implies that e.g. material
waste is avoided, the quality programm state care that defect products are avoided
while flexibility results in avoiding of time waste. This all means that at the end of
the continuos improvements, a state of sustainable internal production is obtained.
It is obvious, that these improvement processes are related directly to the design of
the products.
On the shop floor, the improvements in costs, quality and flexibility can be
measured by using the Transformation Factor (de Ron, 1994). This factor reflects
the deviation of the production system from the ideal situation. It is related directly
to the activities of the shop floor as it is expressed in terms which are familiar to
the shop floor and the operational departments. Furthermore, the transformation
factor should be clear to management as well as relevant.
Maskell (1989), suggests that new performance measures should be introduced
beacause the known measures can not be used satisfactorily. He mentions some
characteristics for these measures which are fulfilled by the transformation factor.
1.3.1 Technical and economical demands for investing in production systems

A type of technology is used to process the raw materials, other types are used in
the production stage resulting in final product. For that reason the technology puts
together materials, technological equipment and machinery, human experience and
methods of organisation.
The chain by which raw materials are transformed into final product is called a
production system and consists of three essential parts: input, process and output.
(see figure 1.2).
Production system
Input
Consumer demand
Material
Money
Energy
Human resources
Education
Process
Design
Production
Management
Output
Consumer goods
Capital goods
Satisfaction and quality
Cost effectiveness
Figure 1.2 Parts of a production system (after Ad de Ron, 1994)
A sustainable production system, is a production system that will have less

impact to the environment, it's end products as well, being characterized by:
(1) reduction of energy usage from non-renewable sources, (2) closing the
production chain by introducing recovery of the goods, parts and materials,
(3) increasing the sustainable product quality (de Ron, 1994).
To transform an existing production system into sustainable one some of the next
strategy could be followed:
Total Excluding Strategy: characterizes the situation in which either it gives no
market demand for the product, or the product doesn't fulfil the sustainability
requirements;this means that there are no economical-ecological reasons to
maintain it.
Reconverting Strategy: characterises the situation in which it gives to a market
demand for the products, or the products don't fulfil the sustainability
requirements and (the product) could be replaced on the market, with other
types of products resulting from other types of technologies; in the mean time
the technical facilities (machinery, equipment etc.) could be used in remodelling
the process (in a sustainable way) for other (sustainable) end-products with
other segment market destination.
Reconfiguration Strategy: characterises the situation in which it gives a market
demand for the product at affordable price, but the product doesn't fulfil the
sustainability requirements, or the technological chain is not sustainable itself
and there are not enough investment funds to finance the total replacing with a
new one;
Total Replacing Strategy: characterises the situation in which already exists a
market demand for the products, and because these are not sustainable, and the
technology to produce them is not sustainable as well but there are enough
money to buy another to fulfil the sustainability requirements.
In figure 1.3 are presented the alternative strategies.
MARKET DEMAND FOR

SUSTAINABLE PRODUCTS
THE CARE FOR

ENVIRONMENT
SUSTAINABLE PRODUCTION
SYSTEMS
TOTAL EXCLUDING
RECONVERTING
RECONFIGURATION
REPLACING
EXISTING PRODUCTION
PROCESS SYSTEMS
Figure 1.3 Making sustainable the production systems through investments
This strategies could be used with success, especially in the Middle and Eastern
European Countries in the process of integration in the European Union, because of
the characteristic conditions of the transient period from centralised state economy
to market economy that made possible deep transformations in the economies of
these countries. The economic transient period is characterised by the transfer of
the property of production systems from state owned to the private and public
owners.
Managerial and technical changes are taking place in the production systems in
order to adapt to market demands.
The situation is different from case to case and it requests an adequate analyse
because the production systems of Middle and Eastern Europe have specific
different problems (some have to be improved, other to be replaced, other to
disappear- depending on the requested level of technological quality and on the
usage degree).
The overused and old equipment and technologies which are still running couldn't
be replace "over the night", because of the lack of investment funds, and socioeconomical aspects, therefore a new type of strategy of renewal is requested to
combine self-improvement and technology modernisation. That means that selfadaptability, experience and creativity of the people employed in firms to become
important resources for self development on a sustainable way.
The factors which have to be considered are:
1) Training and education at all levels to stimulate and encourage quality in
working processes;
2) Flexible organisation;
3) Creativity stimulation;
4) Private initiative stimulation (state laws and firm's policy levels);
4) Industrial property (patents, brands, design, author's rights and obligations for
individuals and firms);
5) New sources of (local, foreign) investments based on mutual advantage;
6) Partnership with much-experienced firms (local or foreign) based on mutual
advantage;
7) Environmental moral behaviour stimulation based on the assumption that the
end products are personal but the environment belongs to all not just to present
but also for the future generation (future generation responsibility behaviour);
8) Encouraging the traditional local experience (if is feasible);
9) Encouraging the use / reuse of local materials and energy.
1.3.2 Good examples of sustainable development models. The Dutch approach
Following the Brundtland Report (1987), the DutchNational Environmental Policy
Plan' was adopted by the government and the parliament (in 1989). In the plan
three elements are central:
1) Integrated chain control: closing the raw material cycles.
2) Energy reduction: energy saving, increase of the energy efficency and using
durable energy sources.
3) Quality improvement: in order to increase the material life time.
The objectives are a large reduction of emissions and energy consumption, and the
use of non-renewable raw materials by means of material recovery.
On the short-term, the environmental mess should be cleaned up as soon as
possible, requesting for new environmental technologies with specific aims and
functions. A number of such technologies to reduce emissions to water and air
already exists or could be developed in the short-term.
On the medium-term, it is expected that within 5-15 years most end-of-pipe and
curative technologies have been installed, and that products will be redesigned in
an environmental - friendly way. The technological developments go on, and it is
expected that new technologies, new products, new processes will be developed in
the mean time, which, however, may create new sources of environmental
pollution.
Thus a second objective for the technology policy is to influence the development
of new technologies in such a way that new technologies products, and processes
do not create new environmental problems,but reduce further the impact of older
technologies.
One of the problems to be solved is how to influence technological development in
such a way that adverse affects do not occur in the future. This is a well-known
question for technology assessment.
New concepts like ' Comprehensive Life Cycle management ' which reefers to the
management techniques (towards use of energy, leakage losses, organisation,
finance and logistics) and ' Life Cycle Assesment', (the Comprehensive Life Cycle
Management and Life Cycle Assesment - LCA, technical methodes that analyse,
quantify and take measures about the environmental consequences of a product on
a scientific and systematic basis through it's entire life-cycle: from extraction of
raw materials, production, use, disposal and the transportation between those
phases)(B. Mazijn,1992), the ' Cascade ' (the concept of using the potential
properties of a product or resource in various subsequant stages) (Hans van
Weenen, 1992) and new type of exploration, the so called 'Environment-Oriented
Technology exploration' ( a scientific way of research made to show how to
explore the environment while taking environmental objectives as a focal point)
(P.J. Vergragt, L.Jansen 1992), are investigated in order to be applied in practice.
The short-term and the medium-term investigations and instruments take the
present situation as a starting point, so the present policies seem to be evolutionary
that means they continue to adapt incrementally improving most of the present
technology. Thus paradigm shifts and fundamentally changes in technological
systems do not appear in this type of policy making.
The long-term Dutch strategy for environmental policy settled in 1990 by the
Dutch Commission for Long-Term Environmental Policy proposes ten radical
changes from a radical change in recognition to a radical change in dialogue.
They put the bases for the"Sustainable Technological Development programm (STD)" that present the sustainability criteria for the year 2040. STD establish that:
"Technology can never be more than a tool, an instrument among others; the type
of technology that will be developed is very much dependent on the structural and
cultural conditions that prevail in society". The programm underlines the fact that
the core of the problem is not to consider the technology as a major part for the
solution of environmental problems or propagating technology as a "panacea", but
the most important is that the potential of technology should be exploited to a
maximum.
STD, states also that the eco-capacity of the earth has already been exceeded and
taking into account that the global population will grow by a factor 2-3 in the next
50 years, the eco-capacity of the earth will be exceeded by a factor of 10-50 if the
efficiency of the technology with respect to the environment remains roughly the
same. Therefore to fulfil the future needs of humans new technologies are
necessary and they are not to be developed earlier than 50 years from now. As the
time is pressing we have to start it now.
To investigate new developments can be used the backcasting method, where a
picture of a most likely future situation is created as a starting point, to think about
the (technical) means which are necessary to reach this state.
Several steps have to be followed:
1) Creating a social support for the challenge to technology developers.
2) Problem of definitions for the development of new technologies i.e
transportation, housing etc, as well as the level of systems (transportation
systems, housing system, etc), as well as the level of products (vehicles, houses)
or utilities (motor, component parts of the houses, heating installations for
housing, energy, materials etc.).
3) Problem chosen for being elaborated.
4) Creating demonstration projects (to set examples in housing, transportation,
food/, clothing and recreation, generally known having a large social impact) in
which a new approach or technology will be developed that must lead to a
communicative design which means a design that fulfils, not just its functions,
but also, sustainability and easy communicability to other technology
developers and the public.
5) Setting the social conditions in which sustainable technology function.
6) Techno-economical feasibility study of sustainable technologies.
7) The people gain trust in technology.
The aims of STD programm are:

- To illustrate the possibilities;
- To indicate the barriers;
- To stimulate a broader discussion;
- To motivate technology developers.
The Dutch government presented in 1991 a document 'Technology and the
Environment', following the National Environmental Policy Plan. In this document
the strategies for a technology policy for the environment, was presented.
However, it appeared that by this policy, in the long-term the goals of
sustainability, could not be reached. Either consumption would have to be reduced
drastically, or drastical changes in technological trajectories and systems would
have to be achieved. (Philip J.Vergragt, Leo Jansen 1992).
Therefore, a new technology program, has been presented by Philip J. Vergragt and
Leo Jansen. The programm starts by the assumption that it takes decades to
develop completely new technological systems. In order to fulfil sustainability
criteria in 2040, i.e. on a time scale of 50 years, research will be started to
investigate the possibilities of new technologies or technical systems that fulfil
human needs and at the same time fulfil the requirements of sustainability, it has to
be studied as well as, the interaction between new technologies and society.
Furthermore, the programm states that the role of technology in solving the
environmental problems, is often ambiguous, because, the introduction of 'clean' or
'cleaner' technologies is not enough. Structural and cultural changes are necessary
to reduce production and consumption in society. As the technology reflects the
norms and values of the society, it is important to"give the highest priority to the
introduction of changes in social norms and values with regard to the environment,
e.g. to work on changing life styles and changing economic structures. The
contribution of technology is necessary, but not sufficient, and work on the
'cleaning up' of technology in interaction with culture and structure is as essential
as working on norms and values". (Ph.J Vergragt, Leo Jansen 1992).
BACKCASTING
Look backwards from the future and work ahead
2040
1990
Culture
Technology
Construction
Transportation
Manufacturing
Agriculture
Supply
Shelter
Movement
Clothing
Feeding
Structure
Less energy
Close
materials
cycles
Avoid Environmental Risk
Demand
Activities
Needs
Demand for technology to fulfil needs
at many fold Environmental Efficency
Fig 1.4 The model of the Dutch Programme" Sustainable Technological Development
(STD)" (adapted from Design for Environment 1992)
Summarising STD, results as:
Technology alone will not give sustainable development.

Conditions for technology development will have to be changed.
Cultural & structural changes will be necessary to support sustainable
technology.
Environmental efficiency of technology will have to increase factor 20.
Illustrative processes to illustrate potentialities of technology.
1.4 Review the literature

The literature in the field of sustainability, sustainable development, sustainable
industrial production deals with various aspects concerning the triangle mantechnology-environment, starting with philosophical assumptions and finishing
with economic, social, technical, political, environmental previews, analyses and
study cases. These appeared and developed as a political and scientific world
reaction to now-a-days problems related to technology and human society
development and the capacity of the earth to face this in the context of pollution
degree rising and raw materials and energy scarcing.
Many books, research paper works and scientific articles give brief conceptual
definitions of sustainability, sustainable development and sustainable industrial
production, try to find or impose models (mathematical, phisical, economical,
social, etc.) in order to give a solution to the up-mentioned problems.
Jeroen C.J.M. van den Bergh (1991) presented a "study that deals with long term,
dynamic models that offer insight into global and regional dimensions of
Sustainable Economic Development (SD). The book consists of three parts. First,
the conceptual background of the study is outlined, thereby emphasizing economic
and regional development, ecological processes, and ethical concern for
environment and future generations. In the second part these elements are
integrated in dynamic models of development. A general material balance, multisectorial model is designed for linking development with natural environment. It is
based on a description of two-way economic-environmental interactions.
Subsequently, this model is extended to represent an open system by taking crossboundary flows and external influences into account. In the third part, an attempt is
made to operationalize SD models in two case studies (for the Netherlands and
Greece)".
The Dutch Committeee for Long Term Environmental Policy (1991), by the book
"Towards a sustainable future" exemplifies the search for a new social order, an
order in which the economic development and environmental protection are
considered interdependent. The four main elements of this search are: (1) signs of
hope, towards a sustainable future, (2) transformations which are needed to reach
this future, (3) philosophical and methodological reflections; and (4) the necessary
changes in the basic institutions of society. The central conclusion is that is
important to establish a green strategy aimed at sustainability. As the committee
states, " There is no certainty and no statistical probability for a sustainable future,
but at least there is a chance".
The US National Academy of Engineering (1989) published a study called
"Technology and Environment" dealing with concepts as " paradox of technology"
meaning it can be both the source of environmental damage and our best hope for
repairing such damage today and avoiding it in the future(J.H.Ausubel,
R.A.Frosch, R.Herman), "industrial ecology as an industrial metabolism"
examining the totality or pattern of relations between economic activity and the
environment (Robert U. Ayres, R.A. Frosch and Gallopoulos, 1989) and the
"dematerialization" characterising the decline over time in weight of the materials
used in industrial end products, or in the "embedded energy" of the products with
the effect that less material could translate into smaller quantities of waste
generating both production and consumption.
In his doctoral thesis, H.J.M.de Vries (1989) "Sustainable Resource Use, an
enquiry into modelling and planning" make a brief analyse of the concepts of
sustainability and the sustainable development. He gives a formal definition of the
modelling relation of the resource dynamics and make study cases from ecology,
economy and social sciences using optimal control theory, catastrophe theory and
non-linear dynamics.
In "Sustainable Development", Michael Redclift (1989) argues that "if the work of
the World Commision on Environment and Development (Brundtland Commission
1987) is to be taken seriously we need to redirect the development process itself, to
give greater emphasis to indigenous knowledge and experience and to take
effective political action on behalf of the environment".
In Economics, Growth and Sustainable Environments (D.Collard, D.Pearce,
D.Ulph 1990) the sustainability user cost concept is introduced. They show that
sustainability could imply the use of environmental services at rates which can hold
over very long time periods and, in theory, indefinitely, but put the question of the
quality of the survival.
1.5 The aim of the investment course on sustainable development bases
The aim of the investment course is to underline the importance of [re]designing or
choosing the adequate technology of the future, the ways to reach to sustainability
level in industrial production systems in the specific transient-economic conditions
of Romania, taking as an example, housing industry investments.
It is assumed the idea that developing sustainable systems in Romania, housing
industry could be an exemple model, one has to start from the existing conditions
(cultural, social, technical, economical) and using creativity and innovation to give
a new value to the work taking into account quality, flexibility and continuos
improvement of the production systems. Production development could solve
social-economical problems as unemployment or inflation.
It is necessary to underline the difference between the concept of growth and the
concept of development. "Growth and development are not the same thing. Growth
can take place with or without development, and development can take place with
or without growth. Growth is an increase in size or number and occurs in
organisms without choice. Development is a process in which an individual (firm,
society, nation) increases his [her] ability and desires and those of others. It is an
increase in capacity and potential, not an increase in attainment. It is more a matter
of motivation, knowledge, understanding, and wisdom than it is of wealth. It has
less to do with how much one has than with how much one can do with whatever
one has. Development is the potentiality for improvement, not the actual
improvement of the quality of life or the standards of living".(R.L.Ackoff 1981).
This mention have to be made for understanding the fact that the way of reaching
to sustainability in industry of Romania ( housing industry, for example), is not
necessary the growth but is necessary the sustainable development. The rise not in
size but in quality.
I've mentioned that in order to avoid the confusion which existed during centralised
economy period when growth means development and vice-versa.
Therefore the sustainable industrial development of Romanian economy could be
realized with existing economical and technical means but using more efficient the
resources involved ( human resources, technology and money).
.
Romanian firms could become more economical and technical feasible, more
competitive, if, following an appropriate strategy of inducing sustainability in their
production process and technologies develop themselves.
This could have benefit results for the whole Romanian economy, because it is well
known that the industrial production influences all other economic branches, as
constructions, agriculture, production of industrial and domestic goods,
transportation, energy, trade etc.
1.6 Summary and recapitulation
Investments are a present spending for a future gain either profit or other benefits
(ecological, social, technical, skils etc.) as were mentioned before.
As a conclusion we relate the investments with the future in all that it concerns.
Therefore, well use a new approach different from the classic one in which only
the economic profit prevails as a basic indicator. The new approach is to relate
investments with the sustainable eco-development concept and the new economy
based on information society concept.
Sustainable Development is a development that meets the needs of the present
without compromising the ability of future generations to meet their own needs
(Brundtland,1987).
For future investments purposes, to arrive at a sustainable eco-product, mostly the
product has to be redesigned as this phase depicts the material usage and
environmental load during the entire life cycle. The technology is known as a
sustainable production requires a continuos improvement of efficiency and
effectiveness.
Technology alone will not give sustainable development:
Conditions for technology development will have to be changed.
Cultural & structural changes will be necessary to support sustainable
technology.
Environmental efficiency of technology will have to increase factor 20.
Illustrative processes to illustrate potentialities of technology.
Practical assignments
Answer the following questions.
1. What means investments?
2. What means efficient investments?
3. Could you exemplify an efficient investment ?
4. What is the sense of the sustainable development concept ?
5. Which is the relationship between investments, development, sustainability,
production and services.
References and homework documentary readings
1. Read the Sustainable Development of Romania Strategy 2000-2020.
2. Read the AGENDA 21 Document of Rio 92 Conference for Development and
environment.
3. Read the law of Environment nr 137/ 1995.
4. Read the laws for stimulate investments.
5. Identify a problem from the real world concerning the necessity of sustainable
investments.
6. Write a report or article for students magazine concerning these aspects.
7. Exemplify the applying knowledge aquired at this course in everyday life.
8. Make a proposal for a sustainable investment for a company in Romania.
Chapter 2
Measures to support investments

in sustainable production
Introduction
Technical measures
Technical-time measures
Utilisation
Technical
Technical efficiency
Real machine capability
Technical Productivity
The Transformation Factor
Economical measures
Productivity as an economic measure
The value of technology
Ecological measures
Measures for ecosystems and land use
Measures for assessment of forests and pastures levels
Measures that take into account the biological diversity
Measures for water resources assessment
Atmosphere pollution and its effects on climate changes
Raw materials and energy resources
Technical-Economical measures
Quality as a technical-economical measure
Quality as a technical-economical-ecological measure
Flexibility as a technical-economical measure
Complex measures
The Transformation Factor as a complex technical, economical and
ecological measure
The economical assessment of the investment in production
processes by using the Transformation Factor
The ecological assessment of the investment in production processes
by using the transformation factor
The
technological-economical-ecological
measures:
The
Sustainability Factor
Benchmarking values for Sustainable Production Systems of
different industries
Conclusions
2.1 Introduction
In Chapter 1 it was mentioned that each branch of activities must become
sustainable at its turn to reach to the level of General Sustainability of an Economy.
Production plays an important role in this process.
The need for a sustainable production is obvious in many activities.
Therefore, appropriate measures to evaluate production systems, in actual
economical and environmental circumstances, are necessary.
Traditionally, measures to evaluate the performance of production systems have
been classified in technical measures and economical measures. These
performance measures are used in the evaluation of production systems. Also the
use of ecological (environmental) measures is proposed.
In some cases, these measures can't cover the evaluations especially concerning
new demands of society as: environment preservation, quality products, energy and
raw materials savings, flexibility according to market demand. Therefore, new
classes of measures as technical-economical measures, technical-ecological
measures, economical-ecological measures and technical-economicalecological measures are demanded in order to assess properly the complex
problem of sustainability. The Transformation Factor (Ad de Ron, 1994) seems to
be a sollution in a multi-disciplinary assessment of sustainable production systems.
In this chapter, the possibility of applying such measures is taken into
consideration.
2.2 Technical measures
The technical measures which describe the performance of production systems are
related with factors such as: time, effectiveness, utilization, efficiency and
capability.
2.2.1 Technical-time measures
Refering to periods that occurs during operations: these are:
- the considered period (the time interval that the production system is observed);
- the available period (the sum of various time intervals established by technical,
legal and industrial regulations);
- the operational period (the part from available period characterised by planned
or previously known interruptions);
- the production period (the sum of remaining time intervals from the operational
period, considering machinery starting, stopping, cleaning etc.);
- the effective production period (the sum of all time intervals during which
production really occurs).
The effective production period could be influenced by downtimes due to

mechanical malfunction of one or more machinery from the production systems,
downtimes caused by defective raw materials (quality, quantity etc.), downtimes
caused by operator error (inattention, negligence or insuficient training), down
times caused by rejects of the processes.
In order to assess the performance of the machine from a production process, an
analysis to underlines the downtimes corresponding to each category (mechanical
malfunction, defective raw materials, operator error and rejects) could be done
using the total downtime audit.
The time apparently available for production with machine "i" regarding these
downtimes can be expressed by:
Tae,i = Tp,i (Tme,i + Trm,i + Tor,i + Trj ,i )

where Tae,j
Tp,i
Tme,i
Trm,i
Tor,i
Trj,i
(2.1)
= apparent effective production period

= production period
= sum of all downtimes due to mechanical malfunctions
= sum of all downtimes due to defective raw materials
= sum of all downtimes due to operator errors
= sum of all downtimes due to rejects subscript "i" means that the
time intervals are related to the i-th machine;
Technical effectiveness
The effectiveness of the i-th machine could be expressed (de Ron 1994) as:
Ei =
where Ei
Qst,i
Qme,i
Qrm,i
Qor,i
Qrj,i
Qst ,i (Qme,i + Qrm,i + Qor,i + Qrj ,i )

Qst ,i
(2.2)
= effectiveness of i-th machine

= standard production volume
= production loss due to mechanical malfunction
= production loss due to defective raw material
= production loss due to operator errors
= production loss due to rejects
As the relation 2-2 underlines, the effectiveness of the i-th machine depends of the
production loss due to various downtimes. The shorting till eliminating the
downtimes will influence positively the production volume. Meanwhile, the
production rate should be known and constant.
2.2.2 Utilisation
The utilisation Ui of the i-th machine given by Florentin and Omachonu (1989,
1991), and analysed by de Ron (1994), is presented under the following form:
Ui =
Te,i
Tae,i
(2.3)
where Te,i
= effective production period,
Tae,i = apparent effective production period.
The performance of machine number "i" is defined by the authors (Florentin,
Omachanu, De Ron) as being:
P = i Ui
where
Tae,i
Tp,i
(2.4)
(2.5)
The performance for N machines (the machine performance centre) is expressed

by:
Pmpc =
1 N
1 N
1 N T
Pi = ( i Ui ) = ( e,i )
N i =1
N i =1
N i =1 Tp,i
(2.6)
This relation (2.6) underlines the fact that the machine performance represents the
fraction of the production period during which effective production occurs. It has
the disadvantage that the disqualified products are not represented, nor the impact
of the production over environment.
2.3 Technical
2.3.1 Technical efficiency
Two types of measures characterise the machine performance (after Wilts, 1993):
the operational efficiency (OE) and the production efficiency (PE), as follows:
OE =
Te
To
(2.7)
where: Te= effective production period

To= operational period,
and
PE =
Te
Tp
(2.8)
where: Te= effective production period

Tp= production period
However, some remarks have to be made: efficiency, as a measure, characterize
both production systems from cyclic and non-cyclic processes (i.e. cyclic plant
production systems and non-cyclic construction works).
The difference is that: if in the case of production plants, manufacturing cycle
efficiency is the principal measure, in the building works, the construction
machinery cycle efficiency is the principal measure.
Therefore, the Manufacturing Cycle Efficiency (MCE) described by Fogarty and
Hoffmann (1993) , which characterizes the plant on-flow processes, is expressed
by the following expression:
MCE =
where: Ts
N
To,n
Tw
Tm
Ts + N To,n
Ts + N To + Tq + Tw + Tm
(2.9)
= set-up time
= number of parts
= operation time per part
= wait time
= movement time of the materials during fabrication process
In the case of building machinery, the Production Cycle Efficiency is characterized

by the relation:
PCE =
where: Ts
To,n
Tw
Tm
Ts
Ts + To,n + Tw + Tm
(2.10)
= set-up time
= operation time per part
= wait time
= movement time of the construction machinery from one place to
another
The difference between the 'on flow' production process which characterize mass
production of comodities and 'in situ' construction works which characterize the
building industry, rely on the fact that if on 'on flow' industrial processes the
machinery are fixed and the materials (to be processed)are in movement, for the
construction works the machinery are in movement and the materials are fixed.
Could be underlined the fact, that, the building industry has both 'on flow'
production processes (to make the component parts of the houses), and 'in situ'
works to prepare the place and assemble the component parts in order to construct
the building.
In the specific case of housing production, as the cyclic (for component parts
production) and non-cyclic processes (for in-situ building works), are coexistent,
the 'Total Manufacturing (Production) Efficiency' will be represented by the sum
between (2-9) and (2-10).
TPE = MCE + PCE
(2.11)
2.3.2 Real machine capability

It is a measure introduced by Barbiroli (1989, 1992), analysed by de Ron (1994)
and is expressed as follows:
Qrmc = Qrs E =
where
Te
(Qst Qr,st )
Tst
To Tcs Te
=
represents the time ratio,
To
To
(2.12)
(2.13)
and,
To
Tcs
and
Te
Qrs
= operation period of the machine

= period due to considered stoppages (unforseen breakdowns,
adjustments)
= effective production period
= reduced production volume because of lower speed (idling, brief
stoppages etc.)
Qrs =
and
To Qst
Tst
(2.14)
E = effectiveness (mentioned in 2.2)
The disadvantage of this mesure is that, is not very specific according to defined
standard quantities, and therefore the possibilities of applying it are limited.
2.3.3 Technical Productivity
In the technical literature, one can find definitions and assumptions about
productivity, which shows different points of view, related to specific domains as
technical and economical fields.
In general, the productivity is expresed by a ratio between two factors from which,
one is time.
In the case of technical productivity, the ratio is between quantity of work and the
time to succed it as it shows the relation of Bardescu, Zafiu and Bnacu (1982,
1984, 1992):
where Qw
Tc
i =1
j =1
Pteh =
Qw
Tc
Pteh =
Qw
60 Tc
Pteh =
Qw
3600 Tc
ki k j
n
i =1
j =1
i = 1...n j = 1...m
ki k j
n
i =1
j =1
ki k j
(2.15)
for Tc expressed in minutes,
for Tc expressed in seconds
= Quantity of work expressed in units of numbers, lengths surfaces,

volumes, masses.
= The total cycle duration (for manufacturing in process industries,
for assembling in constructions, machinery cycle times etc.)
expressed in time units (seconds, minutes, hours)
r
Tc = tk = t1 + t2 + t3 + + tr ,
(2.16)
k =1
t1,t2,t3...tn being production times

n
= k1 k2 k3 kn
(2.17)
i =1
technical coefficients which quantify the production technical conditions (state of

equipments, technical parameters of the machinery, material capability, work
environment conditions etc), usually taking values between 0 and 1
m
= k1 k2 k3 km
(2.18)
j =1
organizational coefficients which quantify the organizational conditions (level of

qualification of the personnel, level of organization of the plant, access to materials
and energy etc.)
The coefficients are established by measurements done by research groups.
The formula (2.15) has the advantage that could be applied as well for production
cycles, as a whole, as for individual machinery, during production processes.
However, it has the disadvantages that quality and flexibility in production are not
considered and the effects of the production over environment, reflected in
recyclability and reusing of materials has, are also not considered.
Therefore, new measures must be considered, and one of them is the

'Transformation Factor'.
2.4 The Transformation Factor
A new measure of the technical performance was introduced by de Ron (1995). It
reflects the fraction of the maximum qualified production volume achieved in the
considered period and shows the capability of the production systems to became
technically efficient.
De Ron starts from the assumption that the law of conservation of matter could be
applyied to the production systems which are considered by him to be linear
systems, (figure 2.1) with an input flow (raw materials, energy, labour, capital) and
a resulting output flow (products and wastes).
INPUT
-material,
-energy,
-labour,
-capital
PROCESS
material
flow
product
flow
-manufacturing,
-assembling
OUTPUT
-qualified products
-disqualified products,
-waste,
-emissions
Figure 2.1 A model for considered production systems (adapted from de Ron, 1994)
Therefore, considering M (t) as the mass accumulated in the system, Fm,in the
material input flow and Fm, out (t) the product output flow, and using the well
known equation from physics, relation (2.19),
dM (t )
= Fm ,in (t ) Fm.out (t )
dt
(2.19),
to simulate the production systems, one should observ that if considering
Fm,out (t ) = Fm,q (t ) + Fm,d (t )

in which
and
(2.20)
Fm,q = flow of qualified products,

Fm,d = flow of disqualified products, waste and emissions,
and taking into account the period 'T', will results
dM (t ) = [F
m , in
(t ) F m , q (t ) F m , d (t )]dt
(2.21)
(2.22),
Rewriting the equation (2.21),

T
Fm,in (t )dt = Fm,q (t ) + Fm,d (t ) dt + M (t )
De Ron (1994) consider that, in a long term, a stable system can not have any
inventory accumulation. Therefore, he considers the period T as being so large that
the storage term can be neglected (a structural or long-term storage is not
considered). So, the equation (2.22) becomes:
T
F m , q (t )dt = F m , in dt
F (t )dt
m ,d
(2.23)
If we take into account the effective production period Te, equation (2.23)
becomes:
T
Te
F (t )dt = F
m ,q
Te
m ,in
dt Fm ,d (t )dt
(2.24)
De Ron (1994) starts with the assumption of an ideal situation, that all the input
flow is transformed completely into qualified products during the considered
period T, so,
T
F (t )dt
m ,in
0
T T
lim
F (t )dt
= lim [1 + (t )] = 1
(2.25)
m , qm
where:
T
lim Fm ,in (t )dt = lim Fm ,qm (t )dt
(2.26)
As we consider Te the effective production period as being a fraction of total

production period T the equation (2.26) will become:
Te
Te
lim Fm ,q (t )dt = lim Fm ,qm (t )dt lim Fm ,d (t )dt (2.27)
Te
Integration of all terms of the equation (2.27) gives:

F
m, q T = Fm, qm Te Fm, d Te
(2.28)
By this equation, de Ron (1994) proved that, the maximum output flow of qualified
products, the otput flow of disqualified products and the effective production
period are independent variables.
The superscript ^ indicates the average value, defined by :
1 T
Fm ,q = lim Fm,q (t )dt
T T
(2.29)
where, the period T is presumed to be known.

De Ron (1994) shows also that the effectiveness of the production system is given
by the ratio of the average real output flow of qualified products and the average
maximum output flow of qualified products:
E=
F
F
m, qm Fm, d
m, q
=

Fm,qm
Fm,qm
where E (0,1)
(2.30)
The equation (2.30) underlines the fact that the fraction of disqualified products
influences the effectiveness, so the effectiveness can be used as a measure for the
quality of production systems.
By using the effectiveness, the transformation factor TF could be obtained:
T
(t ) dt
(t ) dt
m,q
TF =
= E
0
T
m , qm
Te
T
(2.31)
or
TF = E
(2.32)
where is the ratio between the average effective production period and the
considered period T:
T
e
T
(2.33)
The transformation factor is related directly to the activities of the shop floor as is
expressed in terms which are familiar to the shop floor and the operational
departments: the effective production period, that means the period that production
really occurs and the effectiveness, the percentage of qualified products.
The transformation factor is a new performance measure, directly related with the
production strategy from quality-flexibility-recyclability point of view.
We could consider it as a measure of sustainability of the production systems.
The area of application of the transformation factor theory could be enlarged, due
mainly to its interdisciplinary character (technology-economy, technologyenvironment, economy-ecology, technology-economy-ecology). The way of
application will be presented further in this study.
2.5 Economical measures
The economical measures which describe the performance of production systems
are related with factors as: costs, profits, economical productivity, economical
efficiency.
2.5.1 Productivity as an economic measure
The Organization for European Economic Co-operation (O.E.E.C 1950) defined
productivity as the quotient obtained by dividing output (number, quantity of
products) by one of the factors of production (capital, labour, machinery systems
and equipments, raw materials and energy) with consideration to production-costs
and labour-time costs.
Craig and Harris (1973) define the economic productivity as being the ratio
Pec =
where: Pec
C1
Cc
Cr
Cm
Rt
Rt
C1 + Cc + Cr + Cm
(2.34)
= total productivity
= labour costs during a considered period
= capital costs during a considered period
= raw material and purchased parts costs during a considered
period
= other miscellaneous goods and services costs during a considered
period
= total output during the considered period
If total productivity index is less-equal than 1.0 the firm breaks even. A total
productivity index larger than 1.0 means that the company is making a profit.
If profit is included in the output it means that a productivity index using this
output is not an independent measure, because profit directly influences
productivity, which means that activities which are not a result of production may
increase or reduce the productivity.
The main disadvantages of using productivity as an economic measure (in the
actual form) are related to the leak of concordance between productivity and other
factors as quality, flexibility or environment preservation.
Few tempts has been carried out by Craig and Harris (1973), and developed by Son
(1987), following the issues:
- productivity measures must be improved to properly account for the
characteristics of flexible manufacturing systems and to predict and estimate
future manufacturing activities,
- quality and flexibility should be considered in measuring overall manufacturing
performance,
- relationship between productivity, quality and flexibility need to be examined,
- current capital budgeting procedures need to be expanded to incorporate the
benefits of improved quality, flexibility and productivity achieved from
investments in new manufacturing technologies.
Therefore, the ideea of finding new integral performance measures, which are able
to take into consideration the technical assessment with economical audit was
advanced by Son (1987).
Son (1987) showed that factors as productivity, quality and flexibility must be
interrelated each other in a single measure.
Integral Performance Measure
Productivity
Labour
Capital
Material
Overhead
Quality
Process
Product
Flexibility
Equipment
Product
Process
Market, consumer, demand
Figure 2.2 The integral performance measure combines the total productivity,
the total quality and the total flexibility (adapted from De Ron, 1994)
2.5.2 The value of technology

Tipping, Zeffren and Fusfeld (1995) show the important role of continous
innovation for production processes. They propose a model called "The
Technology Value Pyramid-TVP" that provide the foundations, links to strategy
and financial outcomes for the production companies. Tipping, Zeffren and Fusfeld
have identified five managerial factors:
1. Value Creation (VC) - Demonstrates the value of R&D activities to the
positioning, profitability and growth of the corporation and to the creation of
shareholder value.
2. Portofolio Assessment (PA).- Communicates the total R&D program arrayed
across various dimensions of interest, including time horizon, level of risk, core
competency exploitation, and new/old business. This allows optimization of the
total program for the corporation's benefit.
3. Integration With Business (IWB) - Indicates the degree of integration, the
commitmrnt of the business to the R&D processes and programs, teamwork,
and ability to exploit technology across the organization.
4. Asset Value of Technology (AVT) - Indicates the strength and vitality of the
firm's technology (e.g. proprietary assets, know-how, people etc.) and the
potential of the industrial organization to create future value for the firm.
5. Practice of R&D Processes To Support Innovation (PRD) - Indicates the
efficiency and effectiveness of R&D processes in producing useful output for
the firm. The processes include project management practices, idea generation,
communication, and other "best practices" in managing R&D.
The recognition of TVP factors, together with an assembled menu of measures,
allows the model to be used to track the contribution to innovation performance
at different levels of the TVP. The TVP model can be used to track the
performance both prospectively and retrospectively to diagnose weaknesses in the
production chains. and to plan for improvement in the firms.
The various stakeholders have different interests and perspectives on the
innovation process and these are accomodated by the TVP model and the menu of
measures.
The economic and financial measures are presented in Annex 1.
2.6 Ecological measures
The ecological measures to quantify the impact of products and industrial
processes to the environment, cover issues as ecosystems and land use, forests and
pastures, biological diversity, water pollution, atmosphere pollution and its effects
on climate changings, raw materials and energy exausting.
2.6.1 Measures for ecosystems and land use

The change in productivity of production plants or the demand for efficient storage
of production raw materials or products, as well as the needed land for processes
disposal purposes, could ask for an efficient use of land.
Therefore, measurements over production, must include measures as:
current and natural primary production,
percentage change in land use (in %),
number of jobs per hectare,
estimated land production (anual production and value of products produced
related to land-use production surfaces),
measures of emissions and changes in use intensity (net emissions species used
and years of use),
impact of land use (production emissions relationship in specific cases from
urban/rural areas, using as an indicator equivalent people using fossil fuels).
Also, land use potential could be characterized by ratio of potential productive land
to population and by cost and benefits resulted from landfilling rehabilitation
works.
2.6.2 Measures for assessment of forests and pastures levels
It is well known that many industrial activities are using in one way or the other
wood (both for product purposes and for process purposes). It is used with success
in housing industry, at the production of many items as: panels, frames,
furnishings.The wood presents the advantage of being a regenerative resource and
have a high potential of recyclability. Although it needs a certain regeneration
period (depending on the species) to be exploited. Therefore it must be exploited
rationally, to no make no disturbances in the eco-system.
In any feasibility analysis, sustainable production must be implemented< some
elements are necessary to be known about from the point of wiew of the place of
exploitation (country, bioregion, region).
These elements are:
percentage cover of vegetation (type of forest, surface area of dense and open
forests),
percentage decrease of forests (deforestation of dense and open forests, annual
deforestation),
earnings from forests (reforestation in dense and open forests, annual
reforestation),
percentage change in forest surface area (annual deforestation and reforestation,
ratio of deforestation and reforestation),
production of forests (relationship between the wood production and human

population growth/need, wood production per capita/time (year, month)),
forest potential (ratio of wood reserves and population, wood reserves per capita
and per hectare),
cover of vegetation (change in surface area of pastures in % and its influence in
meat production in %),
present and future economic value (ratio of surface area and export value,
currency per hectare).
2.6.3 Measures that take into account the biological diversity
The actual and future production systems must take into consideration the impact
of its activities and products on biological ecosystem.
Therefore, have to be considered, elements as:
number of protected areas (ratio of protected areas to total, % of protected
areas),
risk of species disappearance (relationship of habitat and species disappearence,
index of species disappearance),
investment in protection (relationship of investment and surface area, risk
currencies per 1000 hectares),
decrease in number of species (% threatened animal species and % threatened
plant species),
present and future economic value (protected value of production) taking into
account the ecotaxes,
profitability of investment (current net value), taking into account the ecotaxes.
2.6.4 Measures for water resources assessment
Water is the most indispensable resource, both for life and for human (production)
activities. However, the degree of pollution increased dramatically in the last 50
years, so a great attention must be taken, in order to limitate and decrease this
trend.
Therefore, every production plant have to reconsider its position concerning water
usage.
For every decision itself, must be considered elements as:
distribution of water use (ratio of total resources to industry, % of water
extraction per capita, % of water recyclied-reused in industrial processes),
processes and product impact on water quality (renewable water resources per
capita),
related to the fesability of production processes made by the firm
fresh water reserves (ratio of total water to population).
2.6.5 Atmosphere pollution and its effects on climate changes

If the profit for an industry is local or at least regional, the pollution effects are
global.
The emmisions into atmosphere produced by various activities from industry are a
result of using of non-adequate technologies and machinery to process materials.
The emissions of greenhouse gases could be quantified using descriptors as:
increase in emissions through change in land use, ratio of current and accumulated
emissions, incidence of natural disasters and indicators as: emissions of CO2 Eq.
carbon total and per capita, current and accumulated emissions of CO2 per capita,
population affected and economic losses-acid rains etc.
2.6.6 Raw materials and energy resources
When designing products or processes, one should take care about the availability
of the constituent materials used in the processes to make the products to be easy
recyclied.
In this way, a part of input materials will be reused during the process. From the
economical point of view, it is a problem of efficiency and costs. From the
ecological point of view is a matter of the power of regeneration of raw materials
and energy and of the reciclability potential of the product.
The measures to quantify the power of reciclability of the products are:
- percentage constituent recyclable materials/total materials [%] ,
- percentage embadded energy to make the product/embadded energy to recycle the
products [%] .
The measures to quantify the power of regeneration for raw materials and energy
are related to the ratio between the life-cycle time of the product/required
regeneration time of constituent raw materials, and the ratio life-cycle time of the
product / required regeneration time of embadded [part] energy.
2.7 Technical-Economical measures
2.7.1 Quality as a technical-economical measure
"Lets make things better" it's the advertising slogan which characterize the Philips
products. There are few words that tells a lot about what the phillosophy of quality
means and how could be applied into practice. It means in fact the permanent need
of the society for improved products towards quality.
The measure for quality indicates the degree of perfection in making products.
The quality products are characterized by long-lasting use in various conditions
(in daily use, climate/weather changing conditions etc.), without a complicated
maintenance, with a proper design according to the customers taste, and having a
environmental friendly behaviour (easy recyclable and reusing).The quality
products are made by quality materials, that means that the embedded raw
materials, processed materials and energy, are used with maximum efficiency.
Sons (1987) defines the product quality as the degree of excellence of finished
products, expressed in terms of failure costs that indicate loss due to failure or
finished products to meet quality standards by both the company and its customers:
QP =
Rt
Cf
(2.35)
where: Qp = product quality

Cf = the failure costs during the considered period
The product quality is usually obtained, by processes quality.
Son (1987) defines process quality as the ability of processes to make qualified
products with a small prevention costs:
QS =
Rt
Cp
(2.36)
where: Qs = process quality

Rt = total output in money-value during the considered period
Cp = prevention costs during the considered period
We call processes quality, the quality achieved by the production technologies
(machinery, equipments, control systems), placed in the most efficient technical,
economical and environmental way on production chains or 'in situ works' (i.e.
industrial on-flow processes or building works and shipyards) and using the most
adequate teqhniques, quality control and organization methods.
The processes quality is characterized by:
the quality of management,
the quality of the labour (good level of qualification of the people-it depends on
the case-from the shop floor or construction yard),
good technical organization of the plant or construction yard,
the quality logistics for raw materials and energy used in the process,
the adequate machinery and equipments (with a good technical condition and
following the quality production standards and regulations requirements),
the quality control systems during all production stages (measurement control
devices and methodes),
the quality informatic systems (accurate data bases, expert systems, software,
hardware support) for production processes,
the quality communications systems to provide fast and accurate connections
with suppliers and customers (telematics technologies could become a viable
sollution in the perspective future).
An observation has to be made:
Son (1987) shows (as it was previously presented), that are two different types of
quality measures: process quality and product quality.
Therefore, he defines the total quality QT for the considered period as:
1
1
1
=
+
QT QS QP
or
QT =
Rt
Cp + C f
(2.37)
We say that, in fact, are four different types of quality measures to be considered:
process quality, product quality, environment-friendly product quality and
environment-friendly process quality.
2.7.2 Quality as a technical-economical-ecological measure
The environment-friendly product and process quality represent the ability of
the product and production processes to be well-recepted by the environment.
The items as: recycling-ability (recyclability) and reuse-ability (reuseability) of the
products must be considered as key factors of quality. According to the new legal
regulations towards environment preservation, the producers have the obligation to
receive from the customers the products made by them (after the life-cycle of the
products expired) and recycle them. Therefore, the costs of recycling of the
products must be included in the initial design costs of the products. The costs of
recycling influence the level of quality too, because the standards of quality must
be achieved without affecting the environment. So, the quality of the design for
both product and technology, become crucial for the quality of the product and also
for the quality of the process.
The environment-friendly product quality is the degree of a product to be reused
(parts of it), or recycled, expressed in terms of recycling costs and environment
preservation costs, to meet all quality standards for customer, company and
environment care.
QPenv =
where: QPenv
Rt
Cenv
Cdis
Crec
Cire
Rlt
Cdis + Crec + Cire + Cenv
(2.38)
= Product quality towards environment preservation,

= Total output in money-value during the product life time
period,
= environmental costs (costs for environmental preservation
i.e. environmental improvement works to limitate or avoid
the disposal effects on water, soil, air),
=
costs of dismatling operations of the products.
=
recycling costs of the product,
=
needed costs for improvements in order to reuse products or
parts of it, products or parts without life-cycle expired which
could be reused for other life-cycle product(s) in which:
n
Cire = c pi + Cm
i =1
(2.39)
and
n
pi
= c p1 + c p2 + c p3 + + c pn
i =1
(2.40)
where:
cpi
i
Cm
the costs of the spare parts to be added to the reused parts

in order to make them technically performant,
= 1...n number of parts to be added to reused parts,
=
manufacturing costs for transforming the reused parts from
expired life-time products, into technically performant
parts for a new life-cycle product.
The environment-friendly process quality represents the capacity of the process

to make qualified products, taking into account the production process impact over
environment, during the life-time period of industrial facilities (buildings, plants,
deposits, machinery, equipments), considering, if the case requires, the existent
technologies or the future alternatives to the existent technologies:
QSenv =
Rt
Ciat + Crat + Cenvp + Crql
(2.41)
where:
QSenv = environment-friendly process quality
Rt
= total output in money-value during the life time period of
industrial facilities,
Crat
= Costs of replacing of actual technologies with non polluting
ones (environmental-friendly ones),
Cenvp = Costs of environment preservation (to diminish or eliminate the

polluting consequences of the production processes),
Crql = Costs of requalification of the personnel towards quality
product-quality environment preservation concept.
Ciat
= costs of improvement of actual technologies,
n
n, m , o
n, m , o
n, m , o
n, m , o
i =1
j =1
k =1
i, j , k =1
i, j , k =1
i, j , k =1
i , j , k =1
Ciat = ciat c jat c kat
k w i, j , k
ksi, j,k
kai, j,k
ei , j , k
(2.42)
where:
n
iat
i =1
jat
j =1
o
kat
k =1
n, m , o
i , j , k , =1
wi, j,k
n, m , o
i , j , k , =1
si, j,k
n, m , o
i , j , k , =1
ai, j,k
n, m , o
= Costs of improving the buildings, plants and other fixed assets,

usually used in production processes, toward environment
preservation and energy saving,
= Costs of improving the deposits with materials, fuels and
lubrication agents and/or spare parts forprocess production
machinery toward environment preservation and energy saving,
= Costs of improving the machinery, installations and equipments
toward environment preservation and energy saving,
= Multiplying coefficients toward ecological usage of water during
production process, characterize the degree of pollution-free
measures concerning environmental water, to limitate pollution
effects considered to be produced by process facilities (plantbuildings, deposits, machinery),
= Multiplying coefficients toward ecological using of land, soil, subsoil, during production process, characterize the degree of
pollution-free measures concerning environmental land, soil, to
limitate pollution effects considered to be resulted from process
activities which take place into industrial facilities as plantbuildings, deposits, machinery,
= Multiplying coefficients toward atmosphere protection during
production process; It characterize the degree of pollution-free
measures concerning atmosphere, to limitate air pollution effects
considered to be make by process facilities (plant-buildings,
deposits, machinery),
= Multiplying coefficients toward energy saving ability during

production process; It characterize the degree of energy saving
measures concerning process facilities (plant-buildings, deposits,
machinery).
N/A. The involved coefficients could be obtained by research measurements and
analyses, and reflects the ratio between desired situation and present situation.
i , j , k , =1
ei, j,k
For example, if the water sewing system of a plant has water leaks, let's say 25 %
(0.25), and the system is considered not to have water leaks at value 100 % (1.00),
then kwi1 (coefficient for degree of affection of the installation 1, for example),
will be:
kwi1 =1- 1/4 =3/4 . Results kwi1 = 0.75
As a conclusion, we should underline the ideea that quality of the product should
means both superior technical characteristics of it and environment-friendly
behaviour. Also the process, as a main polluting agent, could reach to a quality
level (reflected especially in benefits from indirect costs shortage, which usually
were not considered), only by taking technical and organizational measures.These
measures are proposed to be applicable in order to isolate and eliminate polluting
factors and to promote pollution free production technologies. But, as things can't
be changed over the night, a strategy to link the quality of processes and products
to environmental present and future demands is necessary.
Therefore, starting from the reality of the moment, the strategy can take into
consideration the next two situations:
- the present situation in which the existent products and production processes
must be adapted to the present and future needs of the customer, producer and
environment, in order to fulfil existent and future legal environmental
regulations and quality technical standards,
- the future situation in which the products and processes, without compromising
their quality technical performance will be designed from now on, in order to
respect legal environmental regulations frame in the field of quality preservation
of environment.
2.7.3 Flexibility as a technical-economical measure
Son (1987) defines four different types of flexibility: equipment flexibility, product
flexibility, process flexibility and demand flexibility.
We think that there are in fact five types of flexibility: product flexibility, process
flexibility, machinery flexibility, demand flexibility and environmental flexibility.
Equipment flexibility is measured by Son (1987) in terms of idle costs-the
opportunity costs for machine under utilisation, meaning the opportunity for the
machine to add value to raw materials:
FM =
Rt
Ci
where:
FM = the machine flexibility
Ci = the idle costs of the machine during the considered period
( 2.43)
Process flexibility, also determined by Son, is given by the expression:
Fs =
Rt
Cw
(2.44)
where:
FS= process flexibility
Cw= the waiting costs during the considered period
The demand flexibility is measured by Son in terms of inventory costs with the
formula:
FD =
Rt
Cj
(2.45)
where:
FD = demand flexibility
Cj = inventory costs
The total flexibility is given by Son as follows:
or
1
1
1
1
1
=
+
+
+
FT FM FS FP FD
(2.46)
Rt
Cw + Ci + Cs + C j
(2.47)
FT =
Following the assumptions of Gustavsson (1984), Son proposes the following

relation for an integral manufacturing performance measure (IMP):
1
1
1
1
=
+
+
IMP PT QT FT
(2.48)
or
IMP =
Rt
C1 + Cr + Cc + Cm + C p + C f + Ci + Cw + Cs + C j
(2.49)
The sensitivity of the IMP to changes, according to de Ron (1994), depends on

three measures: total productivity, total quality and total flexibility. The sensitivity
could be showed by taking a partial derivative of IMP with respect to PT, QT or FT
respectively, which results in:
1
IMP
=
PT 1 + PT + PT
FT QT
(2.50)
1
IMP
=
FT 1 + FT + FT
PT QT
1
IMP
=
QT
QT
QT 1 +
+
PT FT
(2.51)
(2.52)
This shows that, even the derivatives are positive, which implies that if PT
increases, so does IMP, the supposition that productivity, quality and flexibility
have a reducing influence upon performance is wrong.
The conclusion is that using actual type of measures, the estimations could have a
certain degree of inaccuracy leading to wrong investment decisions in new
technologies.
Therefore, dynamic measures, capables of estimating the production systems in
their continously action and interaction with the environment, are required.
2.8 Complex measures
In this chapter was presented the Transformation Factor as a technical measure for
industrial processes. It proved to be a new measure capable of estimating the
dynamism and the complexity of the production systems taking into account new
issues as demanded environmental behaviour of the processes.
The complexity of such problems as the equilibrum product-process-market-natural
environment is asking for measures capable to be quite adaptive and flexible,
because, as we know, the processes are dynamic (not static as it was considered on
an idealistic way for theoretical definitions).
Therefore, a sollution is to enlarge the area of aplication of the Transformation
Factor as a dynamic measure, because all the processes and systems either
technical, economical and ecological (environmental) are dynamic, all the time in
continously change and movement.
2.8.1 The Transformation Factor as a complex technical, economical and

ecological measure
Beginning with the assumption that each process is a dynamic system (the ideea of
systems meaning more than one element and at least two) and each system is a
process (the ideea of process include dynamism) and considering it as a sort of
organism, which must adapt and develop, gaining the environment recognition,
otherwise disappear, we could use three transformation factors to characterize the
technologic, economic and ecologic behaviour of the product and process systems
in their active-interactive relation with the environment.
If we consider as variables, time for Transformation Factor regarding technical
aspects, price, cost, profit for Transformation Factor regarding economical aspects
and quality for Transformation Factor regarding ecological aspects, we will obtain
the desired dynamic relations.
Let it be,
T
(t )dt
(t )dt
mq
TFteh =
= E
0
T
mqm
Te
T
(2.53)
where:
TFteh = Transformation Factor to characterize technical aspects of the
process systems,
TFteh = f ( time);
T
= effective average time,
e
T
= time of process cycle (life cycle time in case of products),
E
= Economic Efficiency,
dt
= time variation (diferential)
It is obvious, that time as an independent variable, can establish a system of
references for the evaluation of the technical efficiency of production systems. In
this way, the Transformation Factor can be used as a complex measure of the
qualified flow of material used in a production process during a settled period of
time.
2.8.2 The economical assessment of the investment in production processes by
using the Transformation Factor
From the economical assessment point of view, is somehow much complex to
establish a relationship between the qualified flow of materials used in production
processes and an independent variable, because, in economics, each variable is

dependent on another(s).
For example, the price of raw component materials used in production processes,
depends on the market demand for the end-products and on the level of available
resources involved (natural resources or recovered materials).
If we consider that the market demand for a certain product could be predicted by
using specific marketing tools (analysis, enquires etc.), that means that a short-time
prediction could be made with a certain accuracy. This sort of analysis is efficient
at the microeconomic level (production firm level), where Fmq is a function of
price (imposed by the market). The market, at its turn, is influenced by factors as:
human needs (could be predicted or stimulated), human society laws and
regulations (could be anticipated) and the availability of materials, raw and
recyclied. As we know, the natural raw materials are a function of exausting
resource time and the recyclied materials are a function of product lifecycle time.
In this way, what has seemed to be an equation with a dependent variable Fmq(p),
comes to be an equation with an independent variable Fmq(t) because of the fact
that, price become function of time p(t), following the mathematical axiom: if A is
f(B) and B is f(C) results A is f(C).
C
( p)dp
( p )dp
mq
TFeconomic =
= Ee
0
C
mq m
Pe
P
(2.54)
where:
TFeconomic = Transformation Factor to characterize economic aspects of
the process systems,
TFeconomic = f (price, costs), where price = f (market demand, resource
availability), and resource availability = f (time: exausting
time, lifecycle time)
Ee
= economic efficiency, show the capacity of making profit,
Dp
= price variation (diferential),

Pe
= effective average price,
P
= price related profit.
2.8.3 The ecological assessement of the investment in production processes by

using the transformation factor
From the ecological point of view, is also difficult to establish a direct relationship
based on independent variables (i.e.time) and the flow of qualified materials used
in production processes.
If before and in the present days, quality was (is) synonymous with a state of
durability (of products), good looking design, functionality and accuracy in
execution, without taking into consideration the impact of the product over the
environment (the level of pollution provided by it after its life-time ending), it is
important now and for the future, to relate quality (of products and processes) to
the environment preservation.
In fact, this aspect has been recognized by ISO1 which through the new standards
series 19000 that replace the former ISO 9000 Quality standards and ISO 14000
Environmental Management standards puts them together. From now on a product
is defined as a quality product not only for its technical characteristics but also if it
has a minimum impact on environment from the point of view of pollution,
material and energy consumption and recycling characteristics.
Aspects as: recyclability, reusability and flexibility in reconversion must be
included beginning with the design stage of the product or production technologies,
because the total costs must take into consideration the environment preservation
(which, presently are viewed as indirect costs).
An example of positive approach of the problem, is represented by the introduction
of the Eco-Tax in the Nederlands in 1996, wich will stimulate an environmental
behaviour both of the industries and of the people.
In conclusion, quality must be reached, fulfiling in the same time the human needs
for welfare and the environmental need for preservation, even that, both are
sometimes in oposition. The state of sustainability, which puts in harmony the
human needs, the industrial production and the environment preservation, must be
the final purpose for a future investor. Otherwise, incalculable consequences will
start to appear.
For practical reasons, Fmq(quality) must become feasable, by considering the
lifecycle assessment (time) of the product not just limiting it to the usage period,
but also to the full-recovery of its component, and taking intoccount the necessary
time to be fully integrated into environment.
ISO - International Standards Organization
If someone asks, how could be measured the quality of the products, the answer
rely on: durability (function of time measured by experimental tests), market
demand continuity (function of the time the product is desirable), flexibility
(product-including design-required time to be technically adapted to new tastes of
the customer), recyclability (necessary time to be recycled), reusability of the most
component parts (depending of the lifecycle time).
This assumptions suppose that quality is, in fact, function of different amounts of
time, related to the full life cycle (of the product toward human consumer and
environment).
The conclusion is that a real quality product is a sustainable product.
Q
mq
TFeco log ic =
(q ) dq
= Eec
0
Q
mqm
(q )dq
Q e
Q
(2.55)
where:
TFecologic = Transformation Factor to characterize Ecologic aspects of
process systems,
TFecologic = f (quality of process and product), quality = f (lifecycle of the
product, time of full recovery, time of full absorbance by
environment)
Eec
= ecologic efficiency of process and product
Q
e
Q
Dq
= effective average quality;

= quality (see definition from 2.5.2)
= quality variation (diferential).
We call the ratio Qe/Q the Reconversion Factor to caracterize the capability of the
products to be easy recyclable and the capability of process to be easy reconverted
(demolished, changed, modernized) to fulfil the environmental regulation. As it
was mentioned in 2.5.2 the proposed concept of quality must be related with the
capability of products and processes to face the environmental demands.
So, the Reconversion Factor is given by the following relation:
Qe
Q
(2.56)
and so, TFecologic becomes:
TFeco log ic = Eec
(2.57)
Using the aggregation method we could obtain the following relations:

The Aggregation Transformation Factor technologic-economic
(ATFtechnologic-economic) is:
ATFtechno log iceconomic =
0
T
0
C
Fmq ( t )dt Fmq (p)dp
TC
Fmqm ( t )dt Fmqm (p)dp
ATFtechno log iceconomic = E techno log ic
Fmq ( t )Fmq (p)dtdp
00
TC
Fmqm ( t )Fmqm (p)dtdp
00
Te
P
E economic e
T
P
(2.58)
The time ratio and the price ratio (from 2.58) could give informations about the
productivity and of the capability of making profit of the selected process system.
Results that the general relation for technical-economical (dynamic) assessment of
production processes is given by the relation:
ATFtechnicaleconomical = TFtechnical TFeconomical
(2.59)
Following the method upmentioned, we could obtain:

-The Aggregation Transformation Factor technologic-ecologic as being:
ATFtechno log iceco log ic =
0
T
0
Q
Fmq ( t )dt Fmq (q )dq
TQ
Fmqm ( t )dt Fmqm (q )dq
Fmq ( t )Fmq (q )dtdq
00
TQ
Fmqm ( t )Fmqm (q )dtdq
00
(2.60)
ATFtechnicaleco log ical = TFtechnical TFeco log ical
resulting:
(2.61)
and
- The Aggregation Transformation Factor economic ecologic as being:
ATFeconomic eco log ic =
0
C
0
Q
Fmq (p)dp Fmq (q )dq
Fmqm (p)dp Fmqm (q )dq
CQ
Fmq (p)Fmq (q )dpdq
00
CQ
Fmqm (p)Fmqm (q )dpdq
00
(2.62)
ATFeconomiceco log ic = E economic
resulting:
Pe
Q
E eco log ic e
P
Q
(2.63)
in which the ratio Pe/P shows of the process systems of making profit in the
conditions of quality (the ratio Qe/Q) according to quality definition for products
and processes.
From equation 2.63 results
ATFeconomiceco log ic = TFeconomic TFeco log ic
(2.64)
2.9 The technological-economical-ecological measures: The Sustainability

Factor
The Sustainability Factor (SF) is the Transformation Factor characterized by the
capability of being used in 3D (three dimensions) environment: technologic,
economic, ecologic.
It gives the possibility to products and processes to be assesed in a dynamic way,
following the requested demands of sustainability state.
The Sustainability Factor could be obtained by aggregating the relations (2.53,
2.54, 2.55). and resulting the equation:
SF =
0
C
0
Q
Fmq (t )dt Fmq ( p)dp Fmq (q)dq
mqm
T CQ
mq
(t )dt Fmq m ( p )dp Fmqm (q )dq
(t ) Fmq ( p ) Fmq (q )dtdpdq
0 0 0
T CQ
mqm
(t )Fmq m ( p ) Fmqm (q )dtdpdq
0 0 0
(2.65)
From this equation results that>
SF = E techno log ic
Te
P
Q
E economic e E eco log ic e
T
P
Q
(2.66)
and considering Productivity = f (time), Profit = f (price), Reconversion = f

(Quality), will result that Sustainability Factor (SF) is a function of Efficiency,
Productivity, Flexibility, Profit and Quality of products and processes to make
products.
2.10 Benchmarking values for Sustainable Production Systems of different

industries
Benchmarking has been recognized as a technique that can asses a process
performance related with best practice levels. Benchmarking itself is a process and,
like many other processes, relies on early planning stages of areas being carried out
with precision and commitment to ensure that all subsequent stages lead to an
effective outcome (Hutton, Zairi 1995).
The Sustainability based Transformation Factor could use the benchmarking
techniques in order to ilustrate the evollution/development/regression of production
systems taking into account the technical, economical and ecological aspects.
The mathematical relation (2.65) could be ilustrated in a 3D benchmarking system
(figure 2.3).
The three independent variables, the effectiveness E, the productivity variance P
and the reconversion R, which determine the sustainability factor, can be shown in
a 3D diagram, figure 2.3:
Values of the Transformation Factor for different production
circumstances
1
0.9
0.8
0.7
0.6
PRODUCTIVITY
0.5
INDEX (P)
0.4
0.3
0.2
0.1
0
0.8
0.6
0.4
0.2
0.6
0.4
0.2
RECONVERSION
CAPABILITY:
RECYCLABILITY,
REUSABILITY,
FLEXIBILITY.
0.8
EFFECTIVENESS (E)
Figure 2.3 Benchmarking values of the Transformation Factor for different

investment production situations, in a 3D reference system
A: mass production, high productivity, one product, low quality, low reconversion
capability,
B: mass production, high productivity, one product, high quality, high reconversion
capability,
C: mass production, low productivity, various products, medium quality, medium
reconversion capability,
D: mass production, low productivity, various products, low quality, high
reconversion capability.
The areas A, B, C, D indicate different investment production circumstances.
For example the industries situated in area A, have a high productivity because
which make one product (make means less stoppages caused by set-ups), but the
quality of the product is low (the price of the product is low) and the reconversion
capability is also low because of the product's inability for dismatling and recycling
processes. The end-product is characterized by non-reusable components due to
low quality of materials and finishing.
The industries situated in area B are characterized by a high productivity and a high
quality of the product, with a high reconversion capability. The product is
characterized by aspects as: easy dismatling, recyclable component materials,
reusable component parts (where necesary) and flexibility in design, according to
the customer's demand. Although, in actual production circumstances, the costs of
such products is still high because of the initial costs of the recycling strategy's
implementation. The problems are related with the new requested design for
products in concordance with the environment preservation demand imposed by
legislation. The new (environmental) product design could impose to the
production firm the development of an appropiate strategy meaning investments in
new types of production and recycling machinery, the aquisition of adequate
component materials, either raw or processed.
The industries situated in area C are characterized by a variety of products with an
average quality, but the productivity to obtain these products is low (many
stoppages and interruptions caused by changing of products, inappropriate tools
and machinery usage, low qualification of the personnel). The using of
non-adequate component materials and a complicated design which don't allow an
easy disassembling and dismatling, give a low reconversion capability to the
products.
Many actual production systems are situated in D area, characterized by the
production of various products, getting a low productivity due to many set-ups and
stoppages. The quality of the products is low to medium and getting a low
reconversion capability (a complicated design using a large variety of heavy
recyclable materials).
In the future, the costs of such products is expected to rise, because of the new
environmental laws and regulations, which will make compulsory the recycling of
the products. In this way, the producers will be forced to find sollutions
(themselves or in conjunction with other specialised firms) to recycle its products.
The purpose toward the improvements of the actual production systems to satisfy
the ecological demand for clean products and technologies, challenge the producers
to find ways to reach from D, C and A areas in B area. Using this instrument, the
producers will notice their position on the market, will estimate their performance,
not just technical and economical, but also ecological. Benchmarking values for
different industries could be given.
2.11 Conclusions
In this chapter, the analytic measures for the evaluation of the sustainability state of
the production systems are presented.
The clasical technical measures are: time measures, effectiveness, utilisation,
operational and production efficiency, real machine capability, machine
performance, technical productivity and the Transformation Factor introduced by
de Ron (1994).
The economical measures which describe the performance of production systems
are related with factors as: costs, profits, economical productivity, economical
efficiency.
The ecological measures over the ecological impact of the production include
measures as 'current and natural primary production', change in land use (in %),
jobs per hectare, land production (anual production and value of products produced
related to land-use production surfaces), measures of emissions and changes in use
intensity (net emissions species used and years of use), impact of land use
(production emissions relationship in specific cases from urban/rural areas, using
as an indicator 'equivalent people using fossil fuels').
These measures can't cover full evaluations of the impact of the production
technologies over environment, especially concerning environment preservation
without affecting the quality for products, energy and raw materials saving,
product's flexibility in design according to customer's taste. Therefore, new classes
of measures as technical-economical measures, technical-ecological measures,
economical-ecological measures and technical-economical-ecological measures
are demanded in order to assess properly the complex problem of sustainability.
Quality assessment is important, both for product and technology, but taking into
account the environmental requirements. Product quality is obtained by process
quality. Son (1987) defines process quality as the ability of processes to make
qualified products with a small prevention costs. The environmetal preservation
requires a new type of standards of assesing quality for products and processes.
The environment-friendly product quality is the degree of product to be reused
(parts of it) or recycled, expressed in terms of recycling costs and environment
preservation costs, to meet both quality standards for customer, company and
environment care.
The environment-friendly process quality represents the capacity of the process
to make qualified products, taking into account the production process impact over
environment, during the life-time period of industrial facilities (buildings, plants,
deposits, machinery, equipments), considering, depending on the case, the existent
technologies or the future alternatives to the existent technologies:
The method of aggregation for the Transformation Factor in different contexts
(technical, economical, ecological) is useful to obtain new complex measures as
the Reconversion Factor and the Sustainability Factor.
The ratio Qe/Q is the Reconversion Factor which caracterize the capability of the
products to be easy recyclable and the capability of process to be easy reconverted
(demolished, changed, modernized) to fulfil the environmental regulation.
The Sustainability based Transformation Factor could use the benchmarking
techniques in order to ilustrate the evollution/development/regression of production
systems taking into account the technical, economical and ecological aspects.
The mathematical relation which exprime the Sustainability Factor is ilustrated in a
3D benchmarking system, which allows the assessment of the position of the
production firm.
By following comparisons between various products obtained by different
production systems, strategic decisions (both macroeconomics and
microeconomics) related with the most adequate design of the products and
production system to reach to the Sustainability state are easy to implement.
Chapter 3
Investments in sustainable
products, the life-cycle approach
Motto: Think in an environmental way before
investing and you will have a future
The life-cycle assessment for products and processes; a technical,
economical, ecological overview
Life-Cycle Technical Analyses (LCTA)
Life-Cycle Technical Analyses (LCTA) for products
Life-Cycle Technical Analyses for production processes
Methodology of assessment of life cycle process
3.1 The life-cycle assessment for products and processes; a technical,

economical, ecological overview
When we talk about the product life cycle, we make reference to the economical
life cycle of a product. In this case, the phases as launch, growth, maturity, decline
and abandon are obvious and well known. Another aspect of any product is that it
has an impact on environment. Therefore, a new vision of the product life cycle is
necessary. The specialists from engineering and economy propose a product life
cycle approach taking into consideration its impact. The difference from the
classical approach is that the life-cycle assessment is regarding the whole time that
characterizes a product or the process from "cradle to grave", comparing with the
reliable life time usage that characterizes a limited period of time, taking into
account just the using period of product or process.
Moll (1993) established a complex life-cycle analysis methodology with regard to
the structure (steady-state versus dynamic), linked to the normative evaluation. He
identifies and analyses three items: energy, materials and services using steadystate life cycle models and dynamic life cycle models.
He shows that a steady-state life cycle model can describe the current or past
(relative) flows and environmental impacts and can predict the future flows and
environmental impacts, using inventory methods and assessment methods for

specific fixed periods. A dynamic life cycle analyse involves the current or past
(relative) flows and environmental impacts and can predict the future flows based
on continuos evaluation of materials, energy, services, using time-in-progress
evolution assessment methods.
structure
normative
evaluation
steady state relative:
life-cycle
mutual
analysis
"product"
comparisons
dynamic life- relative:
cycle
mutual
analysis
scenarios
comparisons
dynamic life- absolute:
cycle
scenarios
analysis
comparisons
with an
normative
level
energy level
material level
service level
Energy Life Material Life Product Life

Cycle
Cycle
Cycle
Assessment
Assessment
Assessment
Dynamic
Dynamic
Dynamic
Energy Life Material Life Service Life
Cycle
Cycle
Cycle
Analysis
Analysis
Analysis
Dynamic
Dynamic
Dynamic
Energy Life Material Life Service Life
Cycle
Cycle
Cycle
Analysis
Analysis
Analysis
Table 3.1 Applications of life cycle analysis (after Moll, 1993)
Moll identified six stages in the life cycle of products related to services and the
energy and materials resources:
1. The supply stage, where the material and energy production is the relevant
parameter and the ratio of the actual production to a sustainable production level
(the yield index) in the case of a renewable resource or the ratio of actual
production to the resource base (the reserve index) in the case of the exhaustible
resources;
2. At the demand stage, the consumption of goods and services is the relevant
parameter. It is related to the growth, maintain, decline and substitution of the
product's demand on the market;
3. The usage stage is determined by the economic lifetime of the products
concerned, taking into account the energy and materials for maintenance and
spare parts for repairing;
4. The waste stage concerns the collection and treatment of disposed substances
5. The secondary supply stage concerns the production of the materials derived
from waste flows;
6. The environmental stage, concerns the transport and diffusion of substances
disposed from the production system/human, through the environmental
compartments.
However, Moll doesn't make a clear delimitation between technical, economical,

social and ecological aspects regarding products and processes. His merit consists
in identifying two types of analyses for life cycle: steady life-time analyses for
short terms (less than five years), and dynamic life time analyses for long terms,
applied for materials, energy, products and services.
Therefore, it is advisable to consider the LCA (Life Cycle Assessment) a synergic
analyse which involves technical, economical, social and ecological aspects of
products and their production technologies using both methods, steady and
dynamic lifetime analyses.
We underline the idea that four distinctive analyses, either for products and/or
processes, are possible:
1) Life-Cycle Technical Analyses (LCTA)
2) Life-Cycle Economical Assessment (LCEcA) deals with the costs related time
aspects of the product in its life cycle from raw materials stage to reuse/recycled
discarded product and the costs of manufacturing/remanufacturing,
3) Life-Cycle Environmental Assessment (LCEnvA) deals with the degree of
impact related time aspects of the product and its production technology on
environment and the available time to remove the consequences,
4) Life-Cycle Social Analyses (LCSocA) deals with the social related time
consequences of products and technologies appearing, evolution, changing,
reconverting and disappearing .
3.2 Life-Cycle Technical Analyses (LCTA)
The Life-Cycle Technical Analyses (LCTA) is important both for products (which
deals with technical performance related time aspects of products from "cradle to
grave") and processes (that deals with technical related time aspects of
technologies involved : methods, machinery, facilities) which are used to make
products.
3.2.1 Life-Cycle Technical Analyses (LCTA) for products
We consider that the life-cycle technical assessment is a sum of reliable life-time
usage of products and processes (times of the products to be manufactured /
assembled / recycled), as follows:
n m
LCA = LTA i , j
i =1 j =1
(3.1)
where:
LCA = Life-cycle assessment of products,
LTA = Life-time assessment of products and processes, i = activity, j = process of
evolution of the product from "cradle to grave"
We distinguish different LTAs for each stage of product's development, from

design, raw materials and energy, till the final product in its last phase of
reconversion/remanufacturing.
The materials used to make products could be either from raw materials resources
and /or recycled materials sources, or from both. In this case, the materials are
considered sub-products, with their own life-time, because they are resulting from
an activity (i.e. raw materials exploitation) or process (recycling).
We could assume that the LTA M = LTA rawM + LTA recM (3.2)
in which LTA M = life-time assessment of embedded materials
LTA rawM = life-time assessment of embedded raw-materials

LTA recM = life-time assessment of embedded recycled materials
Let's consider time unit (TU.) as an implicit reference measure (quantity related
consumption time, performance related to usage time, usage time related to lifetime, recyclability time), for life time assessment of every stage of the cycle
material-product-process-discarded product-waste-secondary material.
The energy is also considered as an important material factor, which has its own
life-time. Whatever the form is (thermal, electrical, mechanical), the energy is a
result of a process by which a quantity of material (coal, oil, gas, nuclear,
hydropower, air flow, hydrogen) suffered a physical transformation (combustion,
hydraulic and / or mechanical displacement, pressure).
The Energy Life Cycle Assessment methods were analysed by various authors, on
various subjects: coal and fuelling electricity plants (de Vries & Nieuwlaar-1981),
buildings (Bekker-1981), energy conservation technologies for conventional
electricity generation and conventional heaters (Oken 1986), wind, sun compared
to conventional electricity (Vringer, Moll et al.-1991), energy and industrial
ecology (Linden 1994), energy and materials life cycle modelling for long-term
environmental strategies (Moll-1993), energy for sustainable industrial production
(Wolters 1994).
The conclusion is that we could distinguish two sorts of energy life cycle
analyses:1) LCA of energy systems (energy / product and energy / production) and,
2) LCA of embedded energy in materials, products and services.
This course deals with the second type of analyse.
I suppose that it is important to consider the embedded energy and its life cycle as
a distinctive step of the product and the product's life cycle analyse.
Let's consider that, for making a product, two distinctive sources of energy are
available: primary embedded energy (from conventional sources-coal, fuel, gas,
hydropower) and secondary embedded energy (resulted from waste processing).
A mathematical relationship dealing with the embedded energy is expressed as it
follows:
LTA E = LTA initE + LTA recE ,
(3.3)
in which LTA E
= life-time assessment of embedded energy, and
LTA initE = life-time assessment of initial embedded energy in product
LTA recE = life-time assessment of reused energy obtained from waste

processing
We consider the product as being either simple product (one component, one
product) or complex product (many components, one product).
The reason is that using a systemic approach, it will be easier to estimate the LCA
for products. For instance, the reusing of components with different lifetimes will
be technically possible just using this method.
Therefore, the LCA for component parts (if there are sub-ensambles) of the product
is treated separately, because, as I've mentioned, they are at their turn, endproducts of a process, which involve materials (initial), energy (initial) and work.
The product results from assembling (putting together) more than one component.
We distinguish four situations:
1. New product, that includes in its structure only new components
(technologically attractive: high performance, maximum lifetime),
2. New product, that includes more new components (more than 50%) and less
reused components,(economically attractive: average costs, good performance,
average lifetime)
3. New product, that includes more reused components and less new components
(customer and social by attractive: low price for the customer, jobs in
production / maintenance, environmental friendly, average performance,
minimum life time)
4. New product, that includes just reused components (ecologically by attractive,
low performance, minimum lifetime).
In the mathematical expression 3.4 we consider that a product could have either
(initial) component parts and / or / no reused component parts.
LTA CP = life-time assessment of component parts
(3.4)
Nr of component parts reused

LTA reusedCP
Max.Nr of reutilizations of the component part(s)
in which LTA initialCP means the life-time assessment of the initial component
parts and has a structure which includes the assessment of the initial embedded
energy and materials, but also, the reused energy ( resulted from waste processing).
LTA CP = LTA initialCP +
LTA reusedCP means the life-time assessment of the reused component parts and
includes the assessment of the necessary required time-amount of energy to make
the reusing technical feasible.
The life time of the product (itself) is referring to its usage period. Let's note
LTA P the life-time of the product during the usage period, from the date of
acquisition to the date of recycling. We have to consider the fact that the product
could have a physical usage period characterised by the loose in technical
performance or functionality and/or a moral usage period influenced by
technologies improvement and evolution (i.e. the case of computer industry, home
appliances industry, automotive industry).
n
So, LTA product = PUP k i MUP , where PUP is physical usage period and k are
i =1
the coefficients to characterise the moral usage period impact ( to quantify changes
in market demand due to technological/technical improvement, human taste/
behaviour, environmental pressure).
For example, in the eightees, a computer was designed to last for ten years, but
because of the average 30 % technological improvement rate / year, many models
became obsolete after three-four years, despite the fact there were functional from
the usage period point of view.
We also make the assumption that is important to consider specific LTA for
services. That includes LTA for logistics (storing, transporting), maintenance &
repairing and distribution.
A mathematical model is presented, as follows:
LTAServices = LTALogistics + LTAMa int anance&Re pairing + LTADistribution = LTAStocking + LTAtransporting + LTAMa int anance&Re pairing + LTADistribution
(3.5)
It is important to short
en
the time related with storing/transporting of the products. This could be done using
the logistics systems (storing and transportation), on every stage of the life cycle of
the product. If we classify the logistics systems into:
- high efficient (short time for storing, short time for transporting),
- efficient (average time for storing, short time for transporting),

- non-efficient (long time for storing, long time for transporting), an accurate
analyse of the LTA for logistics used or proposed to be used could be done.
This analyse is necessary because, in many cases, the time for storing or
transporting could influence the quality of materials or products, which, in fact
influences in a negative way the lifetime of the products.
The lifetime for maintenance/repairing is the period by which a product is out of its
functionality, due to factors as: complicated design / structure, inappropriate usage
by the customer, low fiability of the embedded materials or components.
A time analyse must be done regarding the discarded products, between the
collecting period and the period of reusing of materials and parts.
Therefore, the discarded products must be analysed separately as well, in order to
rise the degree of accuracy of the assessment.
That's why we note LTADP the life-time assessment of discarded product that
includes time spent with disassembling, dismantling, recycling, shredding, reusing,
stocking and transporting and we suggest to be used in any LCA technical analyse
of the product.
An important part of the analyse must be focused on aspects regarding the
Environmental response to the wastes (non-recyclable or hard recyclable). It is
important to find solution in which the environment should be used as a clean
(natural) process to assimilate and transform the wastes according to human need
for energy or material resources.
Nowadays technologies allow this only partially.
Solutions as land filling, plastics re conversion in fuel, recyclable paper
technologies already applied, are considered temporary. The composite materials
recycling is difficult (even impossible).
The land filling or plastic reconversion has backside negative effects by affecting
the ground water's quality. The fuel obtained by plastic reconversion is itself a
source of pollution, by creating new noxes into atmosphere, due to thermal
processing.
Therefore, it is important to assess the necessary Environmental Absorption Life
Time of the products. This could be simulated using the laboratory-oriented
computer programs as MATLAB versions.
The "cycle" concept means a close loop. In reality, the LCA of products is an open
loop, regarding the amount of discarded materials that could not be reconverted
and are spread into environment.
Therefore, the future technologies, following the Design for Environment
principles (DFE), must reach the level in which the Nature itself participates at the
reconversion of wastes, in a constructive way.
The examples in Nature are numerous (i.e reef barriers). Although, some attempts
have already been done, by using wastes from industries to make new construction
materials, but the problem is related with the toxicity degree of some resulted
wastes, that even by reprocessing are human/environmental harmful.
Therefore, any LCA must take into account the estimated environmental absorption
time. I propose the term EALTA to define the Environmental-Absorption LifeTime Assessment for wastes resulted from discarded products that could not been
succeeded to be reused or recycled with actual technologies.
The technical LCA for products is presented as it follows:
Figure 3.1 The technical life-cycle assessment of products
As we've noticed, the methodology of technical LCA for products has 9 steps:
1. Raw materials and energy which includes the phases extracting, stocking,
transporting, processing,
2. Conceptual product which includes the phases: design, transporting processed
materials, stocking processed materials, manufacturing component parts,
stocking component parts, transporting component parts, distributing
component parts, remanufacturing component parts, assembling, stocking
(factory deposits)
3. Usage product: which includes the phases: transporting, distributing products,
customer usage, maintenance & repairing,
4. Discarded product that has the phases discarded products, stocking discarded
product, disassembling, dismantling discarded product,, separation of parts and
materials function of their reusability and reciclability,
5. Reconversion product that has the phases: the reusing of reliable component
parts, dismantling/shredding non-reliable component parts, reusing recuperated
recycled materials, reused parts stocking/transporting/distributing to industries
(reverse manufacturing), potential waste materials to be used as construction
materials separating/stocking/transporting, potential waste materials to be used
as secondary resources of energy stocking/transporting/distributing, nonrecycling waste material stocking/transporting.
6. Secondary materials & energy reusing (includes processing / reprocessing)
7. Waste residual materials to be processed and used in building industry as
constructions materials
8. Remnant waste . Residual wastes eliminated with actual technologies (that must
be revised, because they are themselves an irreversible source of pollution with
impresivisible consequences as: landfill works (ground-water affected),
underground stocking, incineration techniques (air and ozone layer affected),
deep ocean disposal (planetary ocean affected), cosmos disposal (space
affected).
9. Nature involved processes (that has to be developed): New technologies to
reconvert wastes into raw materials and energy resources by using the natural
environment system-mechanism of recycling (eco-bionic technologies).
As a conclusion regarding Life Cycle Technical Assessment of the product, we
should underline the existing fundamental contradiction between the technical
performance related usage time of a product made with primary materials and
components and the technical performance made partially (or totally) with
secondary materials and components.
The expression "primary materials and components" is referring to those materials
(raw or processed) and components, which are used for the first time in a process to
make products. The expression "secondary materials and components" is referring
to the reused materials and components resulted from discarded products recycling
technologies.
Therefore, a product consisting of new materials and components (of high quality),
will have a better performance related usage time comparing with products that
embeds secondary raw materials and components.
However, because of the fact that this solution has economical and ecological
advantages (low prices, limited pollution) it is expected that the production of
hybrid products embedding both new and reused components to be developed in all
industrial branches.
The initial life cycle of a product could be extended by reusing component parts
and materials. The problem is to find the optimum time of reusing, otherwise the
performance of the product will not be effective. The Environmental time-response
to wastes assimilation is important, and new processes to involve the Nature in
clean recycling are demanded.
Therefore, applying the proposed mathematical model:
n m
LCA = LTA i , j = LTA Materials + LTA Energy + LTA CP + LTA P + LTA Services + LTA DP + EALTA
i =1 j=1
(3.6)
a complete technical analyse of LCA for products could be done.
3.2.2 Life-Cycle Technical Analyses for production processes
We usually call " production process" the way of modifying the initial parameters
(physical, chemical, structural, dimensional) of materials using industrial assets
(installations, machinery, equipment, tools, control devices etc. located in specific
destined buildings) and using specific methods and techniques in order to obtain an
end-product on an industrial way.
Therefore, the LCTA for production processes must be considered as an instrument
of analysing the state of machinery, installations, equipment, tools etc. used in the
evolution in progress of the products, stage by stage, from the technical
performance related time of usage point of view.
n m
LCA process = LTA buildings,instalations ,machinery,equipments, tools = LTA RM &Eprocess + LTA Aprocess + LTA DAprocess
i =1 j=1
(3.7)
in which LCAprocess means the Life Cycle Assessment of the process, LTAbuildings,
means the life-time assessment of buildings, installations,
instalations, machinery, tools
machinery, tools and other equipment used in the process.
LTA RM&Eprocess means the lifetime analyse of machinery, installations etc. that are
used to extract, transport, stock, process and deliver converted raw materials into
raw materials (initial materials); and energy used to manufacture/re-manufacture

the assets used in processes ( machinery, installations, equipment etc.).
The life-time assessment of raw materials technologies refers to the period of usage
(expressed in time units) of assets used to extract, stock, transport and process.
Secondary materials (obtained from waste processing) are also considered as
potential alternative resource of materials.
LTA Aprocess means the life-time assessment of assets (machinery, installations,
buildings, etc.) used in the process,
LTA DAprocess means the life-time assessment of discarded assets used in the
process.
After productive life-time expiring, the assets (i.e. machinery are
dismantled/disassembled, the buildings are demolished/disassembled) are
following a recycling phase, by which, old components became new components
(reusing parts), for new assets (machinery, buildings, etc.), and resulted materials
from shredding become a new source of materials, either for the same (similar)
products or other products.
It is indubitable that the quality of such products is lower than the originals because
of the fact that the materials suffer a process of ageing-dematerialization caused by
the induced state of physical/chemical/structural stress as a result of their using.
For practical reasons, if we consider every asset (machinery, installations,
equipment, buildings), involved in the process as being an end-product of an
industry with its own life-time and we apply the theory developed at 3.1 for
products, it will be simple to have a close interrelationship between the life-time of
the products following its life cycle (from cradle to grave) and the life-time of
assets that make products (and their life-cycle).
It may seem difficult and probably a non-sense to do this, but the reason is, if we
want to change the processes in order to fulfill the environmental demand and also
to have a flexibility in production this kind of analyse is necessary.
Figure 3.2 Process inventory and the technical life cycle assessment of assets used
in the process
Using the computers speed of analysing/comparing/computing, it is technically

possible to relate the life-cycle time of the product to the life-cycle time of the
processes (i.e. machinery, installations etc.), both of them gaining total flexibility
with beneficial results in productivity and environment preservation.
The product gain in flexibility, according to the market demand and environmental
regulations, and the process gain in flexibility regarding the process efficiency (the
machinery works at their full capacity). In this case, the machinery of the process
are part of the System Life Cycle.
I define "the System Life Cycle" the life cycle of the system consisted of product
and process, each one being analysed separately, but the results of the analyses to
be assessed in a comparative way.
Figure 3.3 The system product-process Life-Cycle Assessment
Many analyses regarding the life cycle of some products have already been done
(automobiles, refrigerators, telephones, TV sets, computers, food-margarine,
houses etc.), but the life cycle of specific processes to make those products havent
still been analysed, because of their complexity.
The question is: What shall we do with a process system (with its assets) which is
surpassed, overused, non-productive, or polluting? The examples are many:
abandoned facilities in Europe (i.e. France, Great Britain, Italy), USA etc. as a
consequence of technical, economical and ecological changes.
Lately, the production technologies (processes) have become complicated from the
point of view of the materials and composite materials used in making (industrial)
assets. Their recyclability is indubitably much more difficult than simple goods
recovery.
But, as we know from an old Chinese proverb, the longest journey starts with a
single step; applying the methods of LCA used previously to products (i.e.
automobiles), to every asset used in each stage of the process to make products, a
reliable answer could be done.
3.3 Methodology of assessment of life cycle process
We propose a methodology of assessment of process life cycle as follows:
A
1.
2.
3.
Branch identification
Industry
Energy
Constructions and Public works,
B
1.
2.
3.
4.
5
Process type identification with the next steps:

Processes in raw materials extraction
Processes in material production
Processes in product production,
Processes in maintenance / repairing production,
Processes in recycling
C
1.
2.
3.
5.
Process techniques identification

Shredding techniques,
Shaping techniques (rolling, pressing, die-casting, extrusion, sintering)
Assembling techniques (screwing, welding, gluing, nailing, stapling, blind
riveting, concreting),
Treatment techniques (preservation, impregnating, hardening, spraying,
coating, hardening, galvanic) for volumes, surfaces, lengths
Disassembling / dismantling techniques
D
1.
2.
3.
4.
5.
6.
Process machinery inventory for each identified process type.

Mechanic systems and tools,
Electro-mechanical systems and tools,
Thermo-mechanical systems and tools,
Hydraulic-mechanical systems and tools,
Electronic systems and tools,
Informatic hardware systems and tools
E
1.
2.
Machining operations
Drilling,
Milling,
4.
3
4
5.
Turning,
Blanking,
Others
F.
1.
2.
Logistics assessment
Storing (type of deposits, mechanised, non-mechanised),
Transporting (type of means: auto, railway, naval, aero)
Lifetime analyses (prescribed age, usage age, related to: technical

performance, economical performance, ecological performance)
for machinery,
for installations,
for equipment,
for tools,
for control measurements devices and informatic hardware (computers)
for logistics means (auto, railway, aero, naval)
1.
2.
3.
4.
5.
6.
H
1.
2.
3.
4.
5.
6.
7.
I.
1.
2.
J.
Environmental impact analyses ( the identifying of polluting sources and the

causes)
for machinery,
for installations,
for equipment,
for tools,
for control measurements devices and tele-informatic hardware (computers)
for buildings, store houses other constructions (i.e. technological equipment),
for logistics means (auto, railway, aero, naval)
Materials inventory for assets (machinery, installations, equipment, tools,
control hardware, buildings classified after their degree of recyclability
Recyclable materials (easy, medium, hard),
Non-recyclable materials
1.
2.
Required energy for assets (consumption in percentage)

from which:
-efficient consumption in percentage,
-non-efficient consumption due to assets characteristics
L.
1.
2.
Type of used energy:

Thermal energy,
Electric energy
M. Sources of energy
- conventional:
1. Hydraulic power,
2. Coal
3.
4.
1.
2.
3.
4.
5.
N.
1.
2.
3.
4.
5.
Fuel
Nuclear,
- non-conventional
Wind
Sun,
Hydrogen,
Waves
Others
Short term measures for assets improvement.
Replacing polluting / non-productive machinery (assets)
Replacing components of machinery considered to be polluting or large
consumers of materials / energy
Substitution of materials in the design of components considered to be
polluting or energy consumers,
Substitution of the energy sources considered to be polluting or non-efficient,
Quality control at all stages of the process
K. Long term measures:

Total replacing of the processes using Design For Environment concepts, applied
to assets (machinery, installations, equipment, buildings etc.)
As a conclusion, using a formal scheduling, three periods are regarded to be
necessary for a maximum control of product-processes technical life cycle
assessment.
1. Present situation; assessed by inventory methods and instruments regarding the
technical performance of assets, their economic feasibility and environmental
impact. The preparation of the strategies and their implementation into practical
field must be supported by new design regulations product-process-environment
oriented preservation, besides technical and economical performances of
products and processes.
The social impact is also important (i.e. Eastern European Countries faced with
social problems caused by economical and technical changes).
2. Transient situation ; actual production systems are modifying gradually their
technologies by making changes in the structure of processes. (Partial
replacement strategy, quality control system implementation),
3. Future situation: new assets (machinery, installations, buildings) designed by
using DPFE methods (the using of high recyclable materials, the using of
limited variety of composite materials, remanufacturing).
As a general conclusion, the idea is to interrelate the life cycle of the product with
the life cycle of the process, considering the assets also products. The purpose is to
have a good balance between the productivity/environmental aspects of the
processes (related with the life-time of the assets) and the flexibility of the products
according to ecological, economical, technical and social demands.
Chapter 4
The product life cycle costing

a tool for feasible eco-products
investments
Motto: Pay today to have tomorow
Life-Cycle Economical Assessment (LCEcA)

The product life-cycle environmental assessment
Product life-cycle human social impact assessment
Conclusions
4.1 Life-Cycle Economical Assessment (LCEcA)

In technical literature, the Life Cycle Assessment is identified with the "systematic
analytical process of evaluating various alternative courses of action, with the
objective of choosing the best way to employ scarce resources (Fabrycky 1991)
and to find an alternative at actual problems related with sustainable production
implemention.
Some authors (Weitz 1994, Nikolova 1995), use the term "Life Cycle Costing", to
define the analyse related with the costs evaluation during the life cycle of the
product, process, project or activity from initial stage (raw materials, design) to the
final discarding product (recyclable or not).
Although, the term Life Cycle Costing or Life Cycle Costs analyse, shows only one
part of the problem: the part referring to costs (direct or indirect costs). But what
shall we do with the finance aspects of the product/process life cycle?
Therefore, we consider that the term Life Cycle Economical Analyse (LCEcA) is
much appropriate to deal with both costs aspects and financing aspects.
The observation is important, because, as we know, the life-cycle analyses are
related with the concept of "system", which means the closed loop input-
processing-output-backward. One of the inputs (among others) is the initial

investment capital, that means financial input.
The term "costs" is related more with the output and means a value of materials,
energy, products, capital, labour. In technical literature it is also used the term
"price" to nominate the output value of an product or activity.
The Life Cycle Economical Analyses are based on the flows of investments/
reinvestments, profits and debts assessment during the life-cycle of products or
processes and use the Cost Analyses as a
control instrument. The
Cost Analyses are referring to: capital costs, material costs, energy costs, labour
costs, ecological costs, research for environment costs (fig. 3.3). Few cost models
for different life-cycle schemes have been developed by Cohan (1992) and Alting
(1995).
The model developed by Cohan (1992) is incomplete because it does not include
the stages of production and distribution and has a limited sphere of application
(chemical products). It doesn't make any referees to the process costs related with
the assets life-cycle and with the discarded product costs.
Although the model developed by Alting (1995) is much complete than Cohan's
model because he considers the raw materials aquisition costs, material processing
costs, production (manufacturing & assembly) costs, distribution costs, usage,
service costs, retirement & collection costs, recycling (disassembly, dismantling,
recycling) costs, disposal costs, environmental costs, but it is still incomplete
because it doesn't take into account the costs with capital, the costs of
improvements for component parts that will be further reused, research costs
related with product-process-environment aspects, patent costs for product/process
related with environment aspects.
Therefore, the total costs could be assessed with the following mathematical model
based on Alexandru Gheorghiu's "Global Economic Efficiency Analyse" (1977,
1992, 1994) :
Life Cycle Costs = Raw materials acquisition costs + Material processing costs +
Energy acquisition costs + production costs + Logistics costs (storing +
transporting) + Usage & Service Costs + Discarding Costs + Recycling Costs +
Improvements for Reusing Costs + Disposal Costs + Environmental Costs +
Societal Costs + Costs of Capital (invested + reinvested) + Research Costs (for
actual products and processes improvement) + Research Costs (for future Designed
For Environment products / processes) + Patent Costs.
A comparative overview is presented in table 4.1.
Models
raw materials
acquisition costs
material
processing costs
energy
acquisition costs
production
(manufacturing
& assembly)
costs
logistics costs
usage & service
costs
discarding costs
recycling
(disassembly,
dismantling,
recycling) costs
improvement
costs for reused
components
disposal costs
environmental
costs
societal costs
cost of capital
research costs for
improving actual
products and
processes
research costs for
Design For
Environment of
new products and
processes
cost of patents
Traditional
Accounting
Cost Model
Cohan's
Model
Alting's
Model
Banacu's
Model
Table 4.1 Comparative models for Life Cycle Costing
Using the methods of "Global Economic Efficiency Analyses" (Gheorghiu 1994),

the costs could be classified into two categories: direct costs (related with the value
of the product/technology for producer and/or consumer, and indirect costs (related
with the value impact on environment and human society).
Other authors (Bailey 1991) identify four levels of costs related to Life Cycle Costs
Analysis:
1. Usual Capital and Operating costs, including buildings, equipment, materials,
labour, energy,
2. Hidden Regulatory Costs - costs for notification, reporting, permitting, testing,
training,
3. Contingent Liability Costs - can include penalties and legal claims, awards,
personal injuries.
4. Less tangible costs - by reducing pollution, the company can save costs.
The model presented by Bailey (1991) has the disadvantage of not making a clear
distinction between the costs of the company (investment costs, process costs,
logistics costs, marketing costs) and the product's costs (usage, maintenance,
repairing, recyclability) during product's life cycle, and, therefore, he didn't notice
important items as: needed costs for improvement of the product to be recyclable
in an appropriate way (the ability of the product to be remanufactured secondary
reusing of main component parts).
The Life Cycle Economical Assessment means also the financial flows analyses.
There are three financial flows:
Investment flow, characterise the capital investment into: Project Design of
product/process, acquisition of patents, assets acquisition/improvement
acquisition of raw materials and energy, materials processing, production,
manufacturing, marketing, maintenance/repairing, discarding/recycling,
environmental preservation, research toward environment. The continuity of
investments flows depends on the capacity of the company to have a
equilibrated balance sheet and to fulfil the environmental regulations.
Profit flows depend on the capacity of the company to have a clear vision of the
future concerning market demand for products and respecting at the same time
the environmental issues.
There are two categories of profits:
1. Direct Profit (DP), obtained as a result of product's commercial value on the
market.
Selling value of the product
(4.1)
Direct Profit =
>1
Investment Costs to develop the product
The Direct Profit (DP) depends on the ability of the company to be successfully on
the market from the point of view of selling its products (services).
The selling value of the products = the total costs + taxes + company's profit.
The Investment Costs to develop the product means capital costs + design costs +
(raw) materials & energy costs + process costs + marketing costs.
2. The Indirect Profit (IP), obtained as a result of product's environmental value.
Indirect Profit =
Re - usage, Reconversion Value of the product

>1
Total costs to preserve environment / product
(4.2)
The Indirect Profit (IP), depends on the ability of the company to low its Eco- taxes
levels, due to the state institutions by an Environmental Friendly behaviour. That
means to develop product/processes with as more as possible material/energy
reconversion capabilities, to minimise its energy and primary materials
consumption, to encourage its employees toward an environmental behaviour.
We need to corelate our investments in products with the environmental
regulations (i.e. national and EU regulations and directives towards recycling).
Therefore, The re-usage, reconversion value of the product means the value of
components materials and energy resulted by dismantling/disassembling/recycling
of products.
The total costs to preserve environment/product are affecting the company in an
indirect way, by the level of Eco-Taxes which have to be paid. The total costs to
preserve the environment include costs with repairing the environmental damages
caused by industries, developing research focusing recycling for products,
"greening" actual industries, developing technologies to preserve the environment,
education of the people for an environmental behaviour.
If a company from Romania wants to survive economically in the future
competiton in EU, should adapt its management and technologies, by encouraging
the reusing of secondary materials and components resulted from discarded
materials, and to invest in research toward environmental preservation.
The costs of Environmental Preservation are never too high because it means the
costs of Eco-System Survival on this planet, therefore the Indirect Profit for a
Company is its right to exist.
Eco-Taxes flows are a stimulating instrument imposed by the state organisms to
encourage both people (product users) and companies (producers) to have an
environmental-efficient behaviour. Investing in Environment preservation
means, in fact, investing in future.
The Life Cycle Economical Assessment lay-out scheme is presented in the figure
4.1.
Figure 4.1 Flow of profit flow of investment-Eco-taxes interaction
4.2 The product life-cycle environmental assessment

The Life-Cycle Environmental Assessment (LCEnvA) deals with the degree of
environment, and the available time to remove the consequences (as it was
mentioned in the introduction 3.1).
Others authors (J.P Guinee-1995) use the term Environmental Life Cycle
Assessment to define a tool for assessing the environmental impacts. In fact,
Guinee was the first to delimitate the ecological aspects of the products/processes
life cycle assessment from technological or economical aspects. He argues by the
existing terminology in the technical literature: (table 4.2)
1. Substance Flow Analysis (SFA), 1.
known as "material balance"
2. Technology Assessment (TA)
2.
3. Environmental Impact Assessment 3.

(EIA)
4. Risk Assessment (RA)
4.
5. Environmental Audit (EA)
5.
SFA analyses the flows and

accumulations of one substance (or
substance group through the entire
life-cycle of a that substance (group)
within a defined region;
TA assesses environmental, social,
economic and other relevant aspects
of future technologies;
EIA analyses the environmental
aspects of investments and plans
envisaged for specific locations
RA analyses the economic decision
toward investment in a technical
plant or constructions from the
environmental point of view
EA. deals mainly with the
environmental
performance
of
individual business units or firms.
Table 4.2 Comparative terminology for LCA regarding environmental aspects
A reliable way of assessment starts with a systemic approach (figure. 4.1), in which
three main interactive systems, separated by imaginary boundaries are identified:
- product system's life cycle
- process system's life cycle,
- environmental system (echo-system)
The product system's life cycle impact on environment is done by the polluting
emissions to water, air, soil during its stages: raw material extracting, processing,
product manufacturing, product storing/transporting, product maintaining, product
discarding.
Figure 4.2 Life-Cycle of product and process impact over environment
To avoid this, the substitution of polluting materials with environmental friendly

ones, the quality control implementing at all stages of the cycle, the limiting of the
diversity of composite materials and the identification of technological causes that
produces pollution are seen as technical-feasible solutions. The problems are
related with the costs of implementation, therefore encouraging measures are
demanded (i.e. eco-tax measures).
The product system's life cycle impact on environment could be quantified in the
following stages:
Stage 1 Raw materials extraction:
At this stage one can make first an inventory of the materials embedded in the
product, then analyse the level of pollution caused by the loading process by
measuring the waterborne emissions and airborne emissions freed in soil or
atmosphere.
Measures to minimise the looses could be taken by technical and organisational
means. The depletion of resources must also be assessed. Where available, and
where the quality of the materials is in conformity with standards, substitution
secondary materials must replace the (exhausted resources) raw materials. The
effects are obvious: avoid waste disposal extension, the technical costs are lower.
To estimate the raw materials resources, Guinee (1995) propose the followings
evaluation relationships:
depletion = equivalency factorresource extraction resource
(4.3)
resource
and
deaccumulation resource (kg yr 1 )

extraction resource (kg )
resources
reserve resource (kg )
(4.4)
depletion (kg yr 1 ) =
Guinee shows that for raw material extraction, an equivalent abiotic or biotic
resource is consumed. Therefore, he proposes the relationships:
1
equivalent abiotic use(u ref ) = ADPresource (u ref u res ) extraction res (u res )
resource
(4.5)
and
1
equivalent biotic use (u ref ) = BDPres (u ref u res ) extraction res (u res )
resource
(4.6)
in which ADP= abiotic depletion potential is given by the relationship
ADPres (u ref u res
production res (u res yr 1 ) reserveref u ref

)=
production ref (u ref yr 1 ) reserveres (u res )
(4.7)
and
BDP= biotic depletion potential, given by the relationship
BDPres (u ref u res
deaccumulationres (u res yr 1 ) reserveref u ref

)=
deaccumulation ref (u ref yr 1 ) reserveres (u res )
(4.8)
The definition of the ADP contains the production instead of the deaccumulation
rate, as abiotic resources are assumed to have zero regeneration.
The up mentioned relationships allow a feasibility analyse of raw materials
(resources) needed to make products, considering not only the extract quantity, but
also the equivalent consumed energy (gas, fuel etc.) to extract the products.
Stage 2 Raw materials processing; secondary materials reprocessing. The
polluting emissions that could be identified at this stage are noxious, leakage of
solid, liquid, gas, materials during technological process, caused by:
old or overused assets (machinery, installations, equipment), which allows
leaks of materials, steam, noxes during the technological process,
bad conception design of the process,
the absence of environmental safe control systems and anti-polluting equipment,
low-qualified personnel.
Most of the pollution emissions are during the transporting/storing phases
(especially bulk materials), or of thermal processes.
The measures of limiting/avoiding the pollution are mainly technical (overused
machinery replacement, filter systems adding, control of materials at all stages of
the processes).
In the case of new investments for developing the processes, an environmental risk
analyse is demanded.
Stage 3 Product manufacturing/assembling. The principal causes of pollution
caused in a production process are related with the level of technology used in the
process, degree of usage of assets (machinery, installations etc.), type of materials
to be processed/re-processed, type of energy resource used (coal, gas, fuel, electric,
hydrogen), irresponsible behaviour of some employees, inadequate storing/
transporting of (bulk, liquid, gas) materials.
Therefore, the assessment of any product manufacturing/assembling technology

must begin with both Economical Risk analyses and Ecological Risk analyses. The
first step of assessment starts with the inventory of the assets used in the process
and the possible causes of pollution. After identifying the causes, some measures
will be taken:
1.
2.
3.
4.
5.
6.
7.
the checking of product's utility/demand on the market, taking into account the
environmental aspects, and its substitution possibilities,
the checking of product/process design, following the environmental
regulations and standards,
the introduction of quality control measurements (process parameters,
environment parameters) system-devices for every stage in the technical
chain,
the checking and adding (where are missing), of environmental safety
equipment and installations in the process chain (i.e. filters for noxious, liquid
separators, energy preservers, recovery loops). Informatics systems are
considered to make part of the process, for their utility/power of fast data
analysing and transmitting.
the checking and repairing/replacement of damaged water/heating supply
systems,
the replacement of overused / high consumption system machinery,
the (re)qualification/education of the labour toward environmental behaviour.
Measures as: material stimulation/penalties are considered as part of
environmental human-behaviour management.
Adequate environmental solutions for factory internal logistics (internal storing/

transporting of component parts during production process);
Stage 4 Product Logistics & Services Environmental Design. It is the
responsibility of producer (as seller) and customer (distributor, client), to find the
best economical and ecological means for transporting/proper storing and services
(maintenance, repairing) for products. Therefore, the assessment of the
environmental aspects for this stage are related with:
1. environmental quality for transportation (auto, railway, naval, aero)
2. environmental quality for storing (solid, bulk, gas, liquid) materials and
products,
3. environmental quality for maintenance/machinery assets.
Instruments as inventories of the assets which present the state of usage/polluting/
energy consumption, "alternative solutions" lists for assets, economic-ecological
costs analyses are appropriate to give a reliable product logistics & services
environmental design.
Stage 5 Discarded Product : After its usage life time ends, the product becomes a
discarded product, so it starts a reverse process with the phases: dismantling,
disassembling, separating reusable parts, extracting toxic substances/materials,
shredding the remaining parts, separating reusable materials and wastes.
The reusable parts and materials become "secondary" component parts and
materials for other products life cycles.
The wastes are also separated into "useful" wastes (will be used as energy resource)
for other processes, and "useless" wastes (could be toxic or non-toxic) that will be
"hidden" into the environment.
The complexity of the recycling technologies depends of the complexity of the
material structure of the product, and of the structure of the product itself.
Composite materials were a technical solution in the seventies and eighties, when
substitution of materials and energy were considered to be environmental
problems, but their recyclability came to become a problem in the nineties, because
the actual shredding techniques could separate ferrous materials from non-ferrous
materials but can't separate different sorts of plastics/ceramics embedded in the
same material by physical or chemical processes.
A great attention must be paid to the fact that some recycling technologies have a
backside effect. For example, the incineration of waste is itself a source of air
pollution; the waste land filling could affect the quality of the ground water. A
solution is to find means and ways, following the Nature model-bionic
technologies to reconvert the wastes in materials and energy resources.
4.3 Product life-cycle human social impact assessment
Usually, the life-cycle of products is regarded in technical literature as dealing with
the technical aspects (usage life-times, reconversion life-time, technical
performance/usage life-times, utility, functionality, maintainability, flexible design
etc.), economical aspects (costs, financial flows etc.), ecological aspects (impact
degree on environment, re-usability, recyclability, energy consumption decreasing/
substituting etc.).
But the Life-Cycle Assessment of products and processes must also take into
consideration social factors as: number of jobs created/disappeared related with the
life-cycle of the products/processes (from raw materials & energy extraction stage
to re conversion of products), quality of life related with the amount of disposal
waste/cycle stage, number of houses (shelters) that could be built from waste
recycled materials, education/qualification for environment, ageing people's needs
related with their power of consumption, health-care costs and optimum life cycle
of the products/processes.
4.4 Conclusions
The life cycle assessment of products and processes is an important part of any
feasibility study that deals with sustainable production concepts implemention in
existing industries.
Chapter 4 The life-cycle assessment for product differ of technical, economical,
ecological overviewFour distinctive analyses either for products and/or processes
are possible:
1) Life-Cycle Technical Analyses (LCTA)
2) Life-Cycle Economical Assessment (LCEcA) deals with the costs related time
aspects of the product in its life cycle from raw materials stage to reuse/
recycled discarded product and the costs of manufacturing/remanufacturing,
3) Life-Cycle Environmental Assessment (LCEnvA) deals with the degree of
environment and the available time to remove the consequences,
4) Life-Cycle Social Analyses (LCSocA) deals with the social related time
consequences of products and technologies appearing, evolution, changing,
reconverting and disappearing .
The life-cycle technical assessment is a sum of reliable life-time usage of products
and processes (times of the products to be manufactured/assembled/recycled).
We distinguish different LTAs for each stage of product's development, from
design, raw materials and energy till the final product in its last phase of
reconversion/re-manufacturing.
It is important to find solutions in which the environment to be used as a clean
(natural) process to assimilate and transform the wastes according to human need
for energy or material resources.
The System Life Cycle is the life cycle of the system consisting of product and
process, each one being analysed separately, but the results of the analyses to be
assessed in a comparative way.
Many analyses regarding the life cycle of some products have already been done
(automobiles, refrigerators, telephones, TV sets, computers, food-margarine,
houses etc.), but the life cycle of specific processes to make that products were not
still been analysed, because of their complexity. As a general conclusion, the idea
is to interrelate the life cycle of the product with the life cycle of the process,
considering the assets also as products.
There are many abandoned facilities in Europe (i.e. France, Great Britain, Italy),
USA etc. as a consequence of technical, economical and ecological changes. What
shall we do with these assets ?
A methodology of assessment of process life cycle takes into account:

A Branch identification
B Process type identification
C Process techniques identification
D Process machinery inventory for each identified process type.
E Machining operations
F. Logistics assessment
G Lifetime analyses
H Environmental impact analyses
I. Materials inventory for assets
J. Required energy for assets (consumption in percentage)
L. Type of used energy
M. Sources of energy
- conventional
- non-conventional
N. Short term measures for assets improvement.
K. Long term measures
Using a formal scheduling, three periods are regarded to be necessary for a
maximum control of product-processes technical life cycle assessment.
The Life Cycle Economical Assessment means costs assesments, but also the
financial flows analyses.
There are three financial flows: investment flows, profit flows, Eco-Taxes flows
There are two categories of profits:
1. Direct Profit (DP)
2. The Indirect Profit (IP)
The Life-Cycle Environmental Assessment (LCEnvA) deals with the degree of
environment, and the available time to remove the consequences.
A reliable way of assessment starts with a systemic approach (figure. 4.1), in which
three main interactive systems, separated by imaginary boundaries are identified:
- product system's life cycle
- process system's life cycle,
- environmental system (eco-system)
The complete Life-Cycle Assessment of products and processes must take into
consideration also social factors as: number of jobs created/disappeared related
with the life-cycle of the products/processes (from raw materials & energy
extraction stage to re conversion of products), quality of life related with the
amount of disposal waste/cycle stage, number of houses (shelters) that could be
built from waste recycled materials, education/qualification for environment,
ageing people's needs related with their power of consumption, health-care costs
and optimum life cycle of the products/processes.
Chapter 5
INVESTMENTS
IN SUSTAINABLE
PRODUCTION FOR HOUSING;
DESIGNING
THE METHODOLOGY
FOR IMPLEMENTATION
Introduction
Sustainable industrial production for housing; The concepts and
definitions
Market influences on housing industry
The house as a product
Processes for housing; needed conditions for sustainability
Production management for housing
Actors of the housing industry
Building a methodology for Sustainable Housing Production
The background
The life-cycle analyse for housing
The recycling-housing technologies between demolishing and
deconstructing
The feasibility analyse of production processes for housing
Conclusions
5.1 Introduction
It is a fact that the Sustainable Production Concepts is already applied in some
industries as automotive manufacturing industry, home appliance manufacturing
industry (the "green" refrigerators, the "green" telephone, the "green TV sets),
the computer manufacturing industry, the office-birotics manufacturing industry,

the food industry. (table 5.1).
There is a considerable interest to develop methods and techniques for recycling
the existing goods which had finished their life-times.
Discarded products, which became obsolete (i.e. refrigerators, automobiles etc.) are
already the subject of study, experiment and practical application, from the point of
view of their recyclable capabilities ( easy dismantling, disassembling, efficient
shredding, material and component parts reusing).
Technologies to recycle these products are appearing, developing and improving
their performances (i.e. Coolrec b.v. in the Netherlands), by optimizing their
technological chains.
We could speak now about automated/semi automated or simple mechanized
disassembling lines, comparatively with the period of 60-70 and early eighties,
when we spoke only about automated/semi automated/mechanized assembling
lines.
That's because in those periods, the purpose of production was to obtain the highest
possible direct productivity related with technical performance of the products
(number of products produced/time unit).
The designer's attention was focused rather on developing the technologies to make
more products in a shorter time, therefore, the design of the products was much
more fast-assembling oriented than fast-disassembling oriented.
From the nineties, recycling comes to be itself an industry, and, therefore, based on
Design for Environment (DFE) concepts, new products, with easy dismantling /
disassembling capabilities starts to be required on the market.
But the new recycling technologies, requires the (re)consideration of the role of
production assets (machinery, installations, equipment, tools etc.) from the
assembling lines, in such a way, to allow fast assembling,/ fast disassembling of the
products.
The typology, composition and structure of the materials used are also important.
For recycling purposes, it is advisable to limit as more as possible the diversity of
materials, and to minimize the using of materials with low recyclability (i.e. plastic
based composite materials).
Investments in sustainable production for housing; designing the methodology

for implementation
industry
automobiles
manufacturing
home-appliances
product
- automobiles
- engines
(lubricants)
- refrigerators
industry
- washing
machines
- TV sets,
VCRs
- telephone
birotics
-laser printers
appliances
-computers
packaging
buildings &
architecture
food industry
construction
industry
(proposal)
health
-buildings,
energy aspects
-margarine
prod.
-sustainable
production for
housing
-medical
devices
reported cases
- AUDI-VW
(Germany),
-General Motors
(USA)
ICOMIABelgium
- Philips (The
Netherlands),
- Whirlpool
- PA Consulting
Group /
Cambridge
Laboratory (UK)
- Philips (The
Netherlands)
AT&T (USA)
assessor (year)
C. Tritsch (1993)
- Dow Plastics
Europe
- DEC (Germany)
O.Walkhoff (1992)
- TCW (The
Netherlands),
- Green Design
Associates
(USA)
- TUE (The
Netherlands)
- UTCB & ASE
(Romania)
- Technical
University
Berlin
R.L.Kimisch (1994)
P.van Donkelaar
(1992)
De Ron & K.Penev
(1994, 1995)
Giulio Ceppi (1992)
P. Seeney (1992)
De Ron (1995)
Sekutowski (1994)
R.Steinhilper (1992)
W.Sermon (1992)
P.C.F.Bekker (1980,
1991)
A.Derman (1992)
De Ron (1994)
Guinee (1995)
De Ron (1996),
P. Schmid (1996)
C. Banacu (!996),
T. Simonsohn (1992)
Table 5.1 Contributions for developing sustainable products and technologies
During the latest years (1992-1996), we could note an increasing interest in

developing high-recyclable products, and in developing of the system machinery
and tools to dismantle, disassembly, and shred the discarded products. Hi-tech
doesn't mean anymore only hi-performance, it also means hi-recyclability, because

of the difficulties related with the recyclability (composite materials for example).
Although the way of developing recyclable products and developing technologies
for recycling them, it is temporary (short time strategies) and incomplete, because
it doesn't consider the modifying of the process to make new products.
If we want to have maximum efficiency in recycling/reusing, the product must not
be treated alone, must be treated together with the process that makes theproduct.
The systemic approach process-product means, in fact, the cause-effect
relationship. The reverse manufacturing and the sustainable production concepts
are supporting this idea.
Take for example the automotive industry if we develop the automobile to be
easy recyclable, but we don't develop the technology and the logistics to assist the
process, it will be a disequilibrium in the product-process system (the effect is
eliminated but not the cause).
We could say the same thing about the housing industry (considering the house a
product of a specialised industry, similar to automobile as a product of automotive
industry).
Therefore, the concepts of Sustainable Production, already applied in various
industries (see table 5.1), must also be applied in the Housing Industry.
The cause-effect relationship applied to the system House-Industrial Housing
Production is the reliable approach to induce full sustainability in housing industry.
The concept of building a Sustainable House is deeply related to the concept of
(re)building the Sustainable Industrial Production for Housing, because the house
is just the (assembled) product from various products (i.e. panels, bricks, frames,
windows, doors, electric systems, heating systems etc.) which, at their turn, are the
end-products of various industrial production chains.
The production of other items as furniture, home-appliances, textiles is also related
with the housing.
Keeping the comparison with the automotive industry, we note, for example, that
the automobile is a result of assembling component parts, which, at their turn, are
end-products for different production chains (i.e. chassis & body, engines,
transmissions electric systems, controls, windscreens, wheels & tyres, textiles &
chairs etc.).

for implementation
Therefore, the problem of sustainability for housing could be solved with a

systemic approach, in which the house, the technology to make the house and the
products from home-appliances industries for housing are considered interrelated.
This is obvious in recycling. For example, materials considered for some industries
to be disposal waste, could be transformed into construction materials for building
industry.
Because of the complexity of the proposed systemic approach, new measures are
demanded to asses it.
The production (including reverse manufacturing) plays the central role in
developing sustainable housing, because it puts in equilibrium the house and the
technology to make the house, with the environmental problems and the continuos
need for materials and energy.
In the table 5.2 a comparison between the recyclability of different products
resulted from various industries is presented.
Average
life cycle
per
product
84 years
or more
(Bekker,
1980)
Industry
Product
Housing
House
automotive
automobile
homeappliances
refrigerators,
5-8 years
washing
machines, TV
sets, VCRs etc.
computers,
3-5 years
printers, copiers,
fax machines
officeappliances
10 years
Component
Materials
concrete, glass,
wood, plastics,
metals, ceramics,
composite
materials resulted /
non resulted from
waste processing,
adhesives (organic
and non-organic)
metals, plastic,
glass, ceramics,
composite
materials
plastic, composite
materials, metals
plastic, composite
materials, metals
Recyclability of
the
products
using present
technologies
minimum to
medium
25 %
medium to
maximum
75 % to 90 %
(source BMW)
90 % / 35 kg
(source:
K.Penev & de
Ron)
85 %
Table 5.2 Comparison between the recyclability of different products
As it could be seen in the table 5.2., the recyclability in the housing industry is still
low . The main reason: technical, economical and social reluctance.
5.2 Sustainable Industrial Production for Housing;
The concepts and definitions
In the housing industry, the interest concerning environmental aspects appeared
since the seventies, following the world energy crise. At that time, it concerned
much the energy consumption for housing as an ready-made product, the ways to
improve the isolations for not loosing heat, the ways to limit and to decrease the
electric, fuel, coal, wood, consumption. New solutions as energy produced with
solar cells, wind mills, waste processing were considered.
In the eighties, the amount of residual wastes resulted from construction sector
itself and from other industries, together with problems as the exhausting of some
categories of raw materials (i.e. aggregates), imposed the waste materials as an
alternative construction materials. But the interest of the market was limited
because of the technical , economical and social causes.
The technical problems were: the lack of technologies to recycle the wastes,
problems regarding waste transportation and disposal (waste logistics), high costs
for implementing of the recycling methods, presence of sulphur in the composition
of many wastes that affect the durability of construction materials (i.e. concrete),
absence of standards and technical regulations based on the performance tests
(very common procedures for traditional materials in building industry).
The economical problems were related with the fact that the building materials
from wastes were not economically competitive with those resulted from primary
raw materials, or the necessary markets have not existed near the wastes disposal
areas. Although, as the price of primary materials is rising in the construction
sector due to the resource exhausting, and because of the fact that the technologies
of converting wastes into usable materials are rapidly advancing, the substitution of
traditional materials with secondary materials resulted from wastes will grow up in
application.
The social problems were related with the reluctance pressure of the contractors
not to use such materials which could impose changing in traditional technologies,
methods and labour skills of the employees. That means investments in adequate
technologies, qualification of labour, other logistics. Other problems are related
with the lack of standards to settle the quality of such products, a strong argument
for which the contractors don't accept the changing. However, the new
environmental legislative measures (i.e. Eco-Taxes) have stimulated the contractors
to take into consideration the substitution options.

for implementation
In the nineties, the research toward housing recyclability starts to reorient toward a
new approach: The Sustainable Production Housing System (Banacu, de Ron,
Schmid-1996).
It became obvious that it is non-economic and non-ecological to consider the house
alone. To solve the problems of its recyclability and full integration into
environment, the concept of house must be linked to the concept of production for
housing. Therefore, two concepts are proposed: The Sustainable Housing Industrial
Production and The Sustainable House.
The concept of "Sustainable Housing Industrial Production (S.H.I.P)" is
defined as being the ensemble of methods, techniques, instruments, means and
ways to produce the components, parts and materials for housing, in such a way to
be economically feasible, environmental friendly, qualitative and flexible in using.
The purpose of the Sustainable Housing Industrial Production (S.H.I.P) is to
improve the existing housing technologies by using environmental friendly
materials and machinery, and to build the Sustainable House of the future
according to the newest Design for Environment (DFE) requirements.
The Sustainable Housing Industrial Production (S.H.I.P) must be:
1. Easy to implement: to be adapted to the local technological , social, economical
conditions;
2. Socially accepted by the construction firms management and employees;
3. Environmental friendly: the plant processes and the technologies used have to
be: low polluting or even not at all. The dust emissions and noise caused by the
processes have to be reduced at minimum. The soil should not be affected by
any kind of pollution (leakage of polluting agents of any kind: liquid, solid,
gas). The technologies used in plant production processes for housing must
provide recycling capabilities for process disposals. Therefore, "on flow"
systems for recycling and reusing of waste materials must be considered as an
integral part of the technology. Using environmental safety systems at all
production stages, the amount of emissions disposal will be under permanent
control. Another required feature of a sustainable process is to allow easy
maintenance of assets used for production purposes;
4. Flexible to the technological market's evolution. Characteristics as: easy
mounting, maintaining, dismantling of process machinery and equipment, in
order to allow fast replacing of updated machinery with new ones;
5. Economically Feasible (to be economic affordable by the investors and to
provide low costs for maintenance of the assets);
6. Energy saver. To provide low consumes of energy during the processes stages.
To have the capability of saving the energy (i.e. electric, coal, gas, steam,
hydropower), to limit the energy wastes;
7. Raw materials & energy saver: Low quantity, raw construction materials (e.g.
gravel, sand) or low quantity processed materials (e.g. cement, additives,
polymers, metals etc.) has to be used during the production processes;
8. Low quantity water consumer. The industrial water has to be recycled and
reused in plants processes as long as possible;
9. Quality process: That means that the quality has to be considered at all stages of
the production, starting with extraction/processing stage of raw materials &
energy, continuing with processing of materials (primary and secondary),
fabrication of component parts for houses and finishing with quality recycling
process. In order to transform the quality control into a continuing analytic
process, new quality control measurement systems are requested to be included
at all process stages;
10. Secondary materials and parts consumer: The new sustainable production
systems for constructions must have the capability to use secondary materials
and reused components resulted from demolished/dismantled buildings. The
amount of non usable debris must be limited.
The concept of "Sustainable House" means a house with the following
characteristics:
1. To be Environmental friendly : to protect the environment, and to be resistant at
the environmental changes (that means low pollution impact over environment,
weather change/earthquake resistant, maximum recyclability of component
parts and materials),
2. To have adaptive-flexible design (To allow the "building at customer's
taste /needs" house,); to be consisted of "easy to make" component parts, by
using affordable technical, economical, ecological technologies, to allow easy
assembling and easy disassembling (deconstructing, dismantling ) of component
parts for secondary reuse purposes; to allow easy recycling of materials.
3. To be energy saving: that means to be assembled (build) with low consumption
of energy and to do not allow the loose of energy (e.g. thermical, electrical etc.)
during it's usage lifetime.
4. To be a quality product: to assure the quality level of living for the people who
lives in; to be durable (long lasting); to fulfil the quality level for easy
environmental integration.
5. To provide easy maintenance: the component parts must be easy to clean (with
non aggressive polluting agents), the paints has to be non aggressive for the
people or for the environment.
6. Price / Quality effectiveness: to have the best ratio price-quality.
7. Safety: to provide safety against major natural disasters (e.g. earthquakes, river
overflows, fire, storms and others), or accidents (electric shortcuts, fire, etc.).

for implementation
5.3 Market influences on housing industry

The housing market evolution is deeply related with the other markets evolution
from: the construction industry, other industries or sectors of economy (machinery
and equipment fabrication, transportation, commerce etc.).
The evolution (positive or negative) from one market, affects the evolution of the
other markets.
This concludes that the housing market is deeply related with other markets
(i.e. construction machinery market, materials for construction market, labour
market) and, vice versa, the evolution in demand on the housing market affects the
products resulted from convergent industries.
I call "convergent industries" for housing, the industries and activities which
support, on one way or the other, the input by extracting and processing (raw
materials), supplying (processed materials i.e. cement), fabricating, transporting
(materials, machinery and equipment), stocking constitutive elements of the house
or different items that give its functionality (water, heating, electric part
installations).
So, between input (the results of various industries), process (building technology)
and output ( the product - the house) exists organic interconnections.
The definition of Ackoff (1981), about systems, said that a system is "a set of two
or more elements that satisfies three conditions: (1) the behaviour of each element
has an effect on the behaviour of the whole; (2) the behaviour of the elements and
their effects on the whole are interdependent; (3) each formed subgroups of the
element has an effect on the behaviour of the whole and none has an independent
effect on it".
The organic interconnections for housing market are presented in the figure 5.1.
THE CONSTRUCTION MACHINERY

MARKET
THE HUMAN RESOURCE

MARKET
THE BUILDING MATERIALS

MARKET
THE QUALITY CONTROL AND

MEASUREMENTS DEVICES, APPARATUS
AND EQUIPMENTS MARKET
THE HOUSING MARKET
THE DOMOTICS MARKET

(HARDWARE , INTELLIGENT SYSTEMS
AND SECURITY SYSTEMS FOR HOUSING)
TELEMATICS MARKET
(TELECOMUNIACATIONS AND INFORMATICS)
THE SOFTWARE FOR HOUSING

MARKET
THE INSTALATIONS FOR HOUSING

(WATER, ELECTRIC, GAS) MARKET
Figure 5.1 The interactions between the housing market and the "convergent products
for housing" market.
5.4 The house as a product

The house is the product of the housing industry. Comparing with other products, it
has specific characteristics, imposed by its utility and functionality. For example,
the house is considered to be a fix product and the others are either movable (i.e.
goods of any kind) or mobile (i.e. vehicles of any kind). Although, depending from
case to case, the house could be fixed (permanent residential housing), immovable
(temporary housing) or movable (mobile housing, caravan housing).
It was necessary to underline the approaches and the differences, because of the
fact that the utility and the functionality of the house could impose a specific
production technology. For example: the production technology for building fixed
residential houses is different from movable houses (which seem to be closer to
automobile industry).
At their turn, the component parts of the (fixed) house are considered to be:
Fixed parts (the structure: infrastructure-the foundation/superstructure-the
resistant structure of the house, the walls (industrial prefabricated or "in situ"
made from bricks), the floors (industrial prefabricated or "in situ made"), the
cover (prefabricated or "in situ" assembled),

for implementation
Immovable parts: the frames for doors and windows (industrial fabricated),
insulation materials, carpentry, cover tiles),
Partial movable parts: the furnishings (doors, windows) steam/water/gas
heating systems (pumps, boilers, pipes, heaters), electric systems (transformers,
controls, cables, lamps), water supply system ( consisted of pumps, boilers,
pipes)
Movable parts : are home-appliances systems, refrigeration systems (probably
in the near future the refrigerators will be included in the house's wall to avoid
the waste of energy and to allow the shorting of CFC), air conditioning systems,
safety systems (against fire, self inundation, intrusions etc.),"domotics"-or
telematics for housing (systems that allows the info-tele-comunications
connections).
As we could observe, each one of the component parts of the house are the result of
a specific industrial production process.
The main difference between a house and other goods is the way that the
production process looks like. For example, to produce automobiles, the production
process uses fixed machinery (assembly lines) situated in a plant.
To produce houses, the production process for housing will use both fixed
machinery (production lines situated in plants), and mobile machinery (i.e.
excavators, bulldozers, cranes, concrete pumps etc. situated "in situ" (the place
where the house will be made).
That characteristic is important to be underlined in order to design the appropriate
recycling technologies for housing.
The component parts of the sustainable house must have the following nine
attributes:
1) Sustainable design to allow "flexible housing on customer's taste demand",
2) Easy to fabricate,
3) Affordable constitutive materials (preference for local materials),
4) To allow easy and safe storing and transporting,
5) Low energy consumption and low costs maintenance,
6) Easy to assemble "in situ" works,
7) Easy to disassemble (dismantling) instead demolishing,
8) Reusability (the quality of being reusable for few houses life cycles),
9) Recyclability (the quality of being recyclable at the highest percentage with
lowest costs, energy, manpower and equipment).
5.5 Processes for housing; needed conditions for sustainability

Processes are part of the production system (Ad de Ron 1994).
We distinguish two types of processes: 1) Production processes and 2) Recycling
Processes.
In the housing production system, the processes have a large typology which is
given by the large variety of activities (a characteristic for construction sector) and,
of the materials (used/reused) in the processes.
To reach the level of sustainability, the processes for housing must be:
Ecological in design, and using,
Economic (low consumption of materials and energy), appropriate investment
capital costs,
Technologic flexible: flexibility has to characterise the processes, that means the
equipment and machinery involved in construction processes must adapt to new
situations required by changes into technical organisation due to new products,
new materials, using the lowest possible consumption of energy and material
resources at affordable costs.
A good design of the component parts of the house and a good design of the
machinery who make the component parts of the house could assure the
sustainability of the process.
Quality of the process is reflecting in the ability to produce quality component
products, that means in fact quality of the house, as a whole. Therefore, quality
design of the products demands quality execution, this being organic related to the
quality of the equipment and machinery. Quality means also environmental
approach (chapter 3).
The housing technology represents the ways and means by which raw materials
(extracted from natural environment) and/or secondary materials (obtained from
recycling wastes), are processed, becoming processed materials, follows a
production stage and becomes component parts & materials for the house, and
finally are putted into work (assembled, constructed) to obtain the final product
(the house).
The trend in the housing technology development is to give to the recycling stage a
bigger role in the housing life-cycle.
Although, production factors as technological assets, human labour and methods of
organisation, which are specific to the construction industry, must be reconsidered,
taking into account the new demanded recycling technologies for housing.

for implementation
Therefore, the problem of pollution, of energy, of materials (re)using and of quality

products at affordable costs could be solved in the housing industry, by using a
systemic approach, in which house and the industrial production for housing must
be considered together (the cause-effect solving method).
The Sustainable Industrial Production concepts applied in housing industry, come
to be a reliable solution.
As it was mentioned in chapter 1, a production system consists of three essential
parts: input, process and output.
A Production System for Housing could also have the three essential parts, but
adapted to the specific area.
For example:
- The input is represented by the resources for housing [ production] activities.
These are: capital resources, materials resources, assets (machinery, installations,
controls, laboratory facilities, production building facilities etc.), labour resources.
The construction materials resources represents the amount and types of
construction (building) materials used in housing (construction) process. It must be
available in required quantities and quality, to support the "on flow" (housing)
process production technologies. The construction materials must allow easy
recycling and not to harm the environment.
The construction machinery resources, represents the number and types of
construction machinery, that are technological adequate for the specific activities
that characterise the construction processes. There must be a sufficient number, to
assure the continuity of the construction processes. The construction machinery
must be non-polluting as more as possible, to allow easy maintenance and also to
be easy recyclable products.
The labour resources represents the number of qualified employees that
characterizes the various activities in housing technological processes. High
productivity and technological performance in housing could be reached only by
continuous training, specialization/education of the employees toward quality
aspects of the works.
Another aspect that the Management of the Construction Firms has to consider is to
qualify and stimulate the employees toward a higher care for environment.
Therefore, any effort made by a construction firm in this direction is very useful
and offer the guarantee of a sustainable production.
The methods and techniques represents the human knowledge and experience in a
specific field (i.e. various activities from constructions), which allows the problems
(technical, economical, social, environmental) to be solved.
There must be in key with the objectives of the project established by design.
Energy and capital support represent the issues which makes the system working.
There are important parts of input.
The Process is represented by:
The design / production of the component parts of the house,
The design / production of machinery to fabricate the component parts of the
house,
Design of the technology to put together (to assembly, build) the component
parts of the house,
Management (organisational and technical),
The Output is represented by the product: the house and followed by recycling.
A general model of the housing production system is presented in figure 5.2.
THE GENERAL MODEL OF HOUSING PRODUCTION SYSTEM

INPUT
PROCESS
Available material resources
Available construction machinery

resources
OUTPUT
Design/production
of component parts of the house
Investment capital
Primary
flow of
capital,
materials,
energy
Design/ using of production machinery

the component parts of the house
The house
Secondary
flow of
capital.
material,
energy
Architecture, Urban, Rural

planning aspects
Design/ using of the technology

(building/ assembling-Construction
Technology)
Safety
Human Resources
Organizational Management
Quality of life
Methodes and techniques

Technological Management
Cost effectiveness
Energy
Training and education

Recyclying
Deconstructing, dismastling
Reusing
Figure 5.2 The general model of the housing production system
As it was mentioned previous by another type of process is the recycling process.

The recycling processes are dealing with the activities in housing related with the
time periods after the usage (lifetime) of the expired house. It characterizes the
period from the expired usage of the house, to its transformation in recycled
materials and wastes.

for implementation
The main advantage for recycling processes from housing industry, comparing
with the other industries, is the fact that many types of machinery and equipment
are similar or almost the same with the machinery used in the production processes
for housing, and use, more or less, the same vehicles for transportation. For
example: shredders, belt-conveyors, and sieves are both used in processing the raw
material and the recycled materials.
This advantage is useful for the producers of construction machinery and
equipment, to reconvert their production to fulfil the new segment from the market:
machinery for recycling.
It is known that the world recession from the last years affected the production of
construction machinery, that's why the need for recycle machinery is a new
production opportunity.
The advantage is also for contractors which could [re]convert existent machinery
(i.e. from raw material processing), which doesn't work at full capacity, into
machinery for recycling the wastes (from housing industry or for other industries).
5.6 Production management for housing
Management is the way by which using "planning, organization, control, direction
and leadership make the company productive and profitable" (Ad de Ron 1994).
Management, "is the control of a purposeful system by a part of that system".
(Ackoff 1981). It involves three functions: (1) identification of actual and potential
problems-threats and opportunities, (2) decision making and (3) maintenance and
improvement of performance under changing and unchanging conditions".
(Ackoff 1981).
Management involves two aspects: (1) organizational referring to the people
employed to the construction firm and (2) technological referring to the way that
construction machinery systems are coordinated, synchronized and arranged in the
production process to give maximum output with minimum costs and energy. It
could be taken into consideration a third aspect (3), ecological management,
reflecting the ways (both organizational and technical) by which a construction
firm has a correct attitude towards environment preservation and protection.
5.6.1 Actors of the housing industry
We could use the term "Actor of Construction Production Process" for defining the
enterprise (firm) involved in housing production/recycling activities.
The complexity of the life cycle of the house imposes, in one way or the other, the
involvement of different specialized firms/companies:
The companies/firms which works in the housing industry are specialized as
follows:
Architecture & Design Constancy for Housing, for elaborating the design of the
house, the urban/rural planning;
Real Estate Agencies, which deals with the Marketing & Trading activities
related housing (as a ready-made product);
The Extraction and procession materials used in construction (primary
materials: i.e. sand, gravel, stone, basalt, marble), or processing secondary
materials, wood, metal and polymer products normally used in constructions;
The Fabrication of materials for construction i.e. cement plants, concrete
batching plants, asphalt batching plants;
The Fabrication of component materials (i.e. bricks, tiles, roof-tiles, mosaic)building material factories;
The Fabrication of component parts of the house (prefabricate factories,
furnishing factories, water installations for housing factories, electric
installations for housing factories, heating installations for housing factories,
The Construction Companies/firms (specialized on building works for new
houses (buildings), maintenance and repairing works of old (existing) buildings
and constructions, installations-water, electric, heating assembling or repairing
works;
The Demolishing Companies/firms (specialized in demolition works for
existing constructions);
The Recycling Companies/firms (specialized in recovering, dismantling,
disassembling, shredding, separating parts and wastes resulted from
demolishing). These companies are expected to appear and develop in the
construction branch, as it happened in other industries (automobiles, homeappliances etc.).
The various "actors" in the production process for housing, have each one his part
of responsibility in designing and producing/maintaining, recovering
environmental friendly housing products or trading such products.
5.7 Building a methodology for Sustainable Housing Production
As it was mentioned in chapter 1, the aim of this research is to define the measures
and to establish a methodology to be used as an instrument of assessment of the
present situation, for [re]designing the adequate sustainable production systems for
housing.

for implementation
5.7.1 The background

Generally, most of the papers dealing with sustainable housing are focusing the
architectural aspects, urban planning aspects, social-psychological aspects,
environmental aspects and constructing methods of the house. But, there are not
(till now) papers referring to the sustainable industrial production's aspects for
housing.
Or, from our point of view, a sustainable house can't be realised without
sustainable tools that means sustainable technology, because the house, as a final
product of a whole technological chain, consists of component parts, which are, at
their turn, the end products of various industrial production processes.
Although sustainable component parts of the house could be made only by using
appropriate sustainable industrial production systems, so, the design, execution or
acquisition of the [industrial] processes, plants, machinery has to be [re]concept,
taking into account the sustainability concept.
As the figure 5.3 shows, the systemic approach "sustainable house by sustainable
technology", have to start with a "strong foundation". That means the way of
conception of the strategy to be followed:
A "sustainable" architectural design of the house (interior and exterior) have to take
into consideration (urban, rural) regional (local) planning development, the local
(cultural) traditional factors, geographical factors (type of local relief and climate),
the local economic development factors (industrial, tourism, services, agricultural)
and the power of consumption of the local population (with low, medium and highincome possibilities).
Based on a sustainable architectural and urban planning design, a sustainable
technological design of the proposed "sustainable house" have to be established.
That means that the design of the component parts of the house implies easy
assembling (mounting, constructing) and easy deconstructing (dismantling). So, an
appropriate technology is required.
The technological chain has to take into consideration the local possibilities of
obtaining "sustainable construction materials" at lowest prices, lowest consumption
of energy and environmental friendly. Over polluting and high energy consumer
equipment, construction machinery and installations, have to be gradually replaced
with sustainable ones. Sometimes, investing in maintenance of old equipment
could be more costly than replacing with new ones. Feasibility studies have to be
developed on this subject.
SUSTAINABLE TECHNOLOGY
FOR DECONSTRUCTING
(DISMATLING, REUSING AND RECYCLING)
SUSTAINABLE TECHNOLOGY
FOR CONSTRUCTING
(BUILDING, ASSEMBLING)
ADEQUATE METHODES
, EQUIPMENTS AND MACHINERY
ADEQUATE MANAGEMENT
METHODESAND TECHNIQUES
ADEQUATE SELECTIVE AQUISITION FOR
CONSTRUCTION MACHINERY, EQUIPMENTS
AND QUALITY CONTROL DEVICES FOR
"IN SITU"CONSTRUCTION WORKS
ADEQUATE DESIGN OR SELECTIVE AQUISITION

FOR PROCESS MACHINERY THAT FABRICATE
SUSTAINABLE INDUSTRIAL
THE COMPONENT PARTS OF THE HOUSE
PRODUCTION FOR COMPONENT
PARTS OF THE HOUSE
ADEQUATE DESIGN FOR COMPONENT
PARTS OF THE HOUSE
SUSTAINABLE INDUSTRIAL
PRODUCTION FOR BUILDING
MATERIALS
ADEQUATE DESIGN FOR BUILDING MATERIALS

PRODUCTION PROCESSES
ADEQUATE DESIGN OR SELECTION
FOR BUILDING MATERIALS
SUSTAINABLE ARCHITECTURAL AND URBAN PLANNING

DESIGN OF THE HOUSE
Figure 5.3 Sustainable industrial production for sustainable housing. The systemic
approach.
SP 1- Sustainable production stage 1 for construction materials;
SP 2- Sustainable production stage 2 for component parts of the house,
SP 3- Sustainable production stage 3 for assembling (constructing in situ technologies) of
component parts;
D
Demolishing, deconstructing, dismantling of the house, reusing and recycling of the
component parts.

for implementation
Sustainable building materials production stage 1 (SP 1) means the level of the
sustainable technological chain dealing with an adequate selection of the
[local]construction materials, in conformity with the projected sustainable house's
demands, and for the construction materials that need processing i.e. cement,
technical measures to reduce till total avoidance the level of the pollution have to
be [re]considered.
Adequate design of the industrial production processes of construction (building
materials) means organizational and technological measures from the point of view
of sustainability of the processes.
The plants have to be close as possible to the sources of raw materials (i.e. calcar
for cement plant processes), to provide cheap transportation systems (i.e. railways,
water transportation). On flow process systems have to be [re]designed in the way
of rising the productivity by shorting the 'waste times', improving the energy saving
systems by replacing updated machinery with low consumption ones.
The using of appropriate insulation materials at water-steam-gas transfer pipes and
the introducing of new energy saving systems (i.e. industrial water recyclers or
heat-water-steam recovery systems) could avoid the waste of energy and eliminate
the pollution threat. Filters and dust avoidance systems have to be added at the
existing cement plants in order to reduce the environmental dust pollution.
The sewing water systems of the building materials factories have to be analyzed
and checked to replace the inappropriate pipes or inadequate pumps for reducing
the water-wastes or the pollution of the environmental.
The water recirculating systems have to be reconsidered or replaced.
Sustainable production for component parts of the house stage 2 (SP 2) links the
adequate design of the component parts of the house to the "tools" (technology and
equipment) to produce the components parts of the house. Adequate design means
the shape of component parts of the house, related to physical material structure of
that and the appropriate technology to fabricate it.
By Sustainable Technologies for constructions (building, assembling) stage 3
(SP 3), means the ways by which the management planning and construction
machinery for " in situ" works are organized with the main purpose of "sustainable
house building".
The technology have to take into consideration those tools and construction
machinery adapted to the volume of works (little, medium or large).
The main characteristic has to be "the mobility" of the construction machinery and
their availability to be organized into "technically synchronized construction
machinery systems".
"Technically synchronized construction machinery systems" means a system of
machinery that allows proportional interconnections between various types of
machinery used in the process (i.e. volume of excavating soil-excavators) related
with the volume of transporting soil (dump trucks), compacting soil (compactors)
or quantity of the concrete produced (concrete batching plants or in situ concrete
mixers) related to quantity of transportation and put it into works concrete
(concrete truck mixers and concrete pumps), quantity of component [house's] parts
transported (by trucks), related with stored quantity (in mechanized warehouses),
and assembled (by cranes or other elevating system machinery) to fulfill a building
technological process without waste times.
All these construction machinery must be as well "sustainable" products of the
relevant industry that means being economic (from the point of view of the costs
and energy), quality ergonomic, ecological, flexible (to various demands of the
building technology demands).
The degree of complexity of such machinery has to be functional from the point of
view of the degree of complexity of the works.
Therefore, for low volumes construction works, flexible and multifunctional small
size machinery has to be preferred (i.e. mini excavators, mini dumpers, mini cranes
etc.) instead of medium or large machinery.
For medium construction works, multi-functional medium range construction
machinery has to be preferred (excavators with charge loading attachable
equipment, concrete mixer trucks with mounted placing boom, middle size
concrete mixer installations for "in situ " concrete works).
For large construction works, specialized construction machinery has to be
considered. (i.e. excavators, dump trucks, concrete batching plants, cranes etc.)
But for all types of works, "in situ" building materials recycling systems must be
added.
Following the concept " fast erecting [n.a. of the "on customer's" demand house] /
fast deconstructing [dismantling] (when the life-cycle of the house expired), a
conceptual sustainable deconstructing technology for housing (stage D) is
requested. There must be the same philosophy (of course, adapted to the specific of
constructions) as it is in nowadays automotive industry.

for implementation
Therefore, the component parts of the house, the fittings used in assembling
processes have to be conceived in such a manner to allow this demand: fast and
easy assembling / fast and easy deconstructing.
A life-cycle analyse both for the specific component parts (of the house) and for
the house (as a ready-made product), is required in order to classify, select and
identify the component parts [of the house] that could be reused or recycled.
5.7.2 The life-cycle analyse for housing
The general definitions about Life Cycle Analyses were presented in chapter 4.
As it was mentioned in the chapter 4, the life-cycle analyse for housing
(house+process), consists of a technical part, an economical part and an ecological
part.
The Life Cycle Technical Assessment for Housing (LCTAH) is dealing with
technical characteristics: performance related time (process productivity),
consumption related time (i.e. embedded energy, materials), durability,
functionality, maintainability, usability.
The Life Cycle Economical Assessment for Housing (LCEAH) is dealing with the
costs and profits during the life cycle of a house.
The Life Cycle Ecological Assessment for Housing (LCEcAH) is dealing with the
effects on environment caused by housing (product and activities) during the house
life cycle.
A simplified model could be illustrated using the Euler Graph. (figure 5.4)
The Euler Graph could be used in the finding of the optimum ratio energy, material
embedded and energy, material lost during all the stages.
Considering the fact that a certain amount of energy and of materials is
continuously needed through the whole life cycle, at each stage, and not all this
energy and materials are properly used (because of the deficiencies in management,
process design, technology, activities synchronisation, maintenance, labour
qualification or motivation) will result the real amount of used energy and
materials. If at every stage of the cycle is used the transformation factor method of
the assessment (Chapter 3), results the optimisation of the life cycle design of
housing (product resulted from process).
For example, let's consider the first activity (0-1) as being the raw material
extraction/obtaining. The raw materials usually used in constructions are related
with the material, product or process for which they will be used:
- sand, gravel, rocks to make concrete, limestone to make cement, sand to make
glass, wood to make timber or sawnwood etc. Usually, the extraction/obtaining
processes (activities) of raw materials, are energy consumer: fuel consumption
of exploitation machinery used as excavators, tractors, dumpers, trucks,
sawnwood cutters, electric energy for exploitation activities etc. In many cases
the machinery doesn't works in the prescribed parameters (technical,
economical or ecological). If they are overused or non appropriate for the job
(too large or too small) or if the qualification of the employed labour is too low,
that will have a negative influence on the productivity of the works. This will
be considered the "lost amount" non-embedded energy and materials. Also the
ecological impact of machinery on environment is negative (direct effectpollution) and negative (indirect effect-over consumption of energy). To avoid
this, an inventory assessment with the real state of machinery is necessary.
Probably, in the future, due to Eco-Taxes, many contractors will be forced to
pay attention to the state of machinery, their consumption of energy and their
pollution level. The purpose is to minimise the difference ("embedded-win""non embedded-lost") materials and energy.
The second activity (1-2), material processing characterises the materials industry
from construction sector. For example: cement industry, plastics industry, glass
industry, ferro-metal industry, aluminium industry, sawnwood industry etc. At this
stage, each process is organized "on flow".
The machinery and installations are situated in fixed positions in plants. The
processes are characterised by technological phases as: milling, heating, sieving,
compressing, crushing, moulding etc. In this sort of phases a certain quantity of
energy/materials is lost because of factors related with the state of machinery
(overused, updated), design of the installations (old fashion design), or of the nonecological initial design of the process itself.
The environment could be affected (directly and indirectly) by non-controlled
polluting emissions. The most known polluting and non-efficient technologies in
constructions are the cement production and the plasters production.

for implementation
Figure 5.4 The housing life cycle using the Euler Graph.
An improvement of the situation implies the market competition between various

producers (i.e. of cement) which could stimulate the owner to find available
investment funds for modernisation. Another way is based on the Eco-Taxes
(already applied in the Netherlands) to stimulate the producers of construction
materials and products to have an environmental behaviour.
The adequate level of Eco-Taxes could make the producers to invest in adequate
control systems and informatics systems at every stage of the process. In this way,
the wastes of energy and polluting materials/products spreading into environment
could be under control and minimised.
Meanwhile, the quality of the process is improving.
The third activity (2-3), the component parts of the house production involves: the
production of bricks (limestone, concrete), the production of prefabricated panels
(reinforced or non-reinforced concrete, wood, composite materials etc.), the
production of furnishings, the production of installations for housing (heating,

electrical, gas, water supply etc.).
The production processes are consisting of technological phases as mixing, internal
transporting, moulding, pressing, stressing, packaging, stocking, external
transporting etc.
The main looses of energy/materials are connected with the state of machinery or
technological organisation of the plants. Usually, the heating/moulding processes
are large consumers of energy.
The way of improvements depends of the capacity of the firm/organisation which
owns the plant, to invest in control devices acquisition, in order to assess the
process, and also to invest in replacing large consumer machinery with much
economical ones.
The fourth activity (3-4), the building/assembling represent the amount of works to
make the house. It is what is called "in situ works". The general trend is to
transform this activity into an industrial one (to replace " building concept" with
"assembling concept"). What is characteristic for this activity comparatively with
the previous one is the fact that the production process is in the open air (with all
the inconvenience caused by weather changes, for example), every time in other
place, depending of the location, the machinery and installations are mobile
(excavators, bulldozers, cranes etc.). Replacing the traditional technologies for
buildings with technologies based on easy assembled parts of the buildings could
have as an instant effect the shortening of scheduled time for finishing the house
with all the advantages, including lower consumption of energy and materials.
The over consumption of energy (fuel and electric) is characteristic for old,
updated or overused construction machinery. Other causes of total over
consumption energy & materials/process are related with the optimum selection of
machinery to be used, in concordance with the volume of works.
The fifth activity (4-5) is represented by either demolishing or deconstructingdismantling.
The usual demolishing techniques emphasis several stages:
Dismantling / disassembling of installations of the house (i.e. furnishings,
thermal installations, water supply system installations),
Loading and transporting of the installations at specialised recycling factories,
The demolishing of the house stage.

for implementation
Depending of the type, size, structure and location of the house, three methods of
demolishing are usually used:
mechanical impact (big metal ball carried on excavator/crane based machinery),
mechanical pull-on ( bulldozers),
remote controlled implosion/explosion.
The methods present the advantage of being fast, but presents the disadvantage that
a large quantity of debris is resulting, most of it being non-economic and
technically impossible (with actual technologies), to be recycled.
However, the debris is loaded and transported either to a recycling plant to be
recycled or is used in land filling works.
At actual level of technology, it is difficult to speak about the recycling by full
dismantling technologies in the construction industry of Romania, following some
reasons as:
the absence of recycling (dismantling) companies on the construction market,
the buildings (most of them) are built following the old techniques (masonry,
concrete reinforced panels etc.) and therefore, have a rigid structure which
doesn't allow the application of dismantling/disassembling technologies.
However, some categories of existing houses are compatible with the recycling by
dismantling technologies. For example: wood panel houses (solution mainly
applied in USA and Canada). In the case of reinforced panel houses the solution is
technically (at this moment) difficult to be applied, because even when the house is
dismantled/disassembled there are not facilities to reprocess them.
One solution is to [re]convert the actual prefabricated factories (which are not
working at their full production capacity), into recycling for constructions
companies. In fact, the re-process is the key in the recycling industry for reinforced
panels concrete housing (common solution in Romania).
Re-process for prefabricated panels implies ways by which the reinforced concrete
panels are following the reverse way from product to secondary materials and
parts.
For example: a reinforced concrete panel means, in terms of materials, embedded
energy and processes: cement, sand, gravel, additives, water, reinforcing rebars
lattice etc., which are moulded together (thermal process), follows a solidification
stage, and becomes a product.
Reversing the process, the same reinforced concrete panel could become materials
(secondary). The technical problem is related with the matter "how" should we
de-solidify the panel? If this problem is technically, economically and ecologically

solved, the full recyclability of concrete panels could become a reality.
At this moment, the only feasible technological method for recycling of
dismantled/disassembled reinforced concrete panels is to follow the stages (also for
demolishing) - cutting (of reinforced concrete panels resulted from structure
dismantling-which is costly and difficult),
shredding,
sieving (cascade riddling),
separating (ferromagnetic techniques, eddy current etc.).
The resulted materials are separated into "secondary" materials (reused in the
process to make new components) and parts, and wastes materials (used at land
filling works). The resulted secondary parts could be reused at new assembling
processes (activity 3-0 dash arrow).
Because of costs reasons and because of the lack of technology experience in the
field, the recycling of reinforced concrete panels is rather difficult.
However, the method of deconstructing by dismantling could be applied for other
types of housing (i.e. panel wood made, panel composite materials made, panel
materials from wastes made).
Some relevant data regarding life cycle technical assessment for houses were
showed by Bekker (1980).
As it could be observed in the figure 5.5 , the conditions required for the housing
industry to reach the level of sustainability, suggest to (re)consider the recycling
(stage) from housing technologies.
The [re]consideration of the recycling housing technologies means to try to replace
the concept of "demolishing" with "deconstructing/dismantling". But that means a
fundamental [re]conception of the technologies to build the houses (especially of
the component parts of the house).

for implementation
Raw materials,
-Stone,sand, gravel.
-Calcar,
-Ferous minereus
-Oil,
-etc.
ENERGY
-Coal,
-fuel,
-Hydro,
gas'
-Nuclear
TECHNOLOGICAL
PROCESSES
PRODUCTION OF
BUILDING MATERIALS
COMPONENTS PARTS
OF THE HOUSE
COVER;
-tils,
-metal sheets
PRODUCTION OF WOOD AND

METAL ELEMENTS (frames doors etc)
DECONSTRUCTING
(DISMASTLING)
-bricks
FRAMES
REUSING
HOUSE
PRODUCTION OF INSULATION
MATERIAL ELEMENTS
ASSEMBLING
Prelucrated materials:
-Cement,
-Aditives,
-Polymers
-Composite materials
CONCRETE PRODUCTION
RECYCLYING
PRODUCTION OF PREFAB.ELEMENTS
PANELS
PRODUCTION OF ELECTRIC
AND HEATING EQUIPMENTS
Figure 5.5 The life-cycle diagram of the house
The advantages are:

The time to build a house is shorter,
The reusing of parts and materials (on secondary markets), could provide new
opportunities for housing sector (a new segment of cheap houses could appear
on the market). People with low incomes could have better living conditions at
affordable prices;
The environment is protected by avoiding new disposals.
5.8
The recycling-housing
deconstructing
technologies
between
demolishing
and
The recycling methods using demolishing techniques were presented previously.

The demolition of buildings and highways results in the generation of large
amounts of potentially usable materials. Studies have been carried out to determine
the types, amounts, and potential uses of demolition materials being produced in
the United States (Clifton, Brown, Frohnsdorff 1979), The Netherlands (Bekker
1980).
The annual amount of waste material resulting from the demolition of buildings
and highways has been estimated to be of the order of 27 x 106 tons (in the United
States).
The large number of buildings and construction (especially concrete constructions),

which, from various reasons (utility, functionality, safety), are not, or will not be in
using, demands strategies to establish measures and means for as more as possible
full recycling.
It is a fact that the materials resulted from demolished concrete structures were
recycled and reused for new buildings, in Europe, early after the World War II,
when the scarcity of available financial and technological resources made the
exploitation of virgin resources to be inappropriate.
The amount and type of demolition material available depends on the age of the
demolished structures. For example, the mean age of demolished buildings in
Boston (USA) is approximately 65 years; in Atlanta (USA) 35 years and in Los
Angeles (USA) 45 years (Wilson, Foley, Wiesman 1976).
The level of usage of recovered materials depends on the specific material and the
geographic region. At present, only an insignificant portion of the available
concrete, wood, gypsum, asphalt and plastics from demolished buildings and
highways are recycled. Large quantities of these materials are disposed in landfills.
(Clifton, Brown, Frohnsdorff 1979). Concrete clearly constitutes the major factor
of demolition material, and it will be predominant as demolition material, for at
least next 100 years (Jones, Holley 1973). This fact, coupled with prospects of
future regional aggregate shortages, has stimulated investigations of the feasibility
of using crushed concrete rubble as aggregate for new concrete (Clifton, Brown,
Frohnsdorff 1979).
The low level of recycling of demolition materials is attributable to several factors
as higher processing cost of the demolition materials compared to virgin materials;
low cost of dumping demolition materials; and institutional restrictions.
The technology of separating the materials present in rubble needs to be improved.
For example, large amounts of sulphate from gypsum plaster and board could
contaminate concrete rubble. If such concrete were used as aggregate for new
concrete, the concentration of sulphate ions could be sufficient to produce
disruptive reactions with the cement matrix.
Another factor which appears to be limiting the recycling of demolition materials is
lack of data on amounts and availability of specific types of demolition materials.
(Clifton, Brown, Frohnsdorff 1979).
This statement, based on analyses, confirms the idea that is more economic to
"dismantle" the building into pieces (same technologies already applied in
automobile and home appliances industries), and to reuse the good parts and to
shred the waste. But this method requires new technologies by which the

for implementation
component parts to be produced and assembled in a modular manner and after

lifetime expiring to be easy dismantled and disassembled.
The method of choosing housing recycling technologies (demolishing or
dismantling), depends on the type of technology that has been initially used at the
building of the house.
The central element of the house, which impose the choosing of the building
technology, is the wall (non-load bearing, load bearing, exterior or interior). We
distinguish two situations in building technologies:
- Walls made from bricks (clay, concrete etc.),
- Panel-walls (prefabricated walls made of concrete, wood, composite
materials etc.)
As it could be observed in the figure 5.6, the dwellings are made using one of the
two methods: using walls made (in situ) by building bricks, or using prefabricated
walls made on industrial way, in prefabricate plants.
The bricks technologies offer the advantage of a great flexibility in design of the
house, but recyclability doesn't have the same characteristic.
Also, the "brick walls" solution presents the advantage of getting low production
costs from the point of view of bricks production, but presents the disadvantage of
getting low recyclability of materials resulted from demolition. Also the time and
costs related with the building activities are higher.
The demolition, as a technique, is also a bottle-neck because it produces a large
quantity of debris, dust, many materials parts of the house (building) being lost,
without a chance to be recuperated.
Figure 5.6 Comparative solutions for production / recycling housing technologies

(prefabricated panels versus bricks).

for implementation
Cavity wall
density 150 Material
kg/ m2
1.Non-load
bearing
- Exterior
-Interior
Load
Bearing
Plaster
interior
Plaster
exterior
Ceramic bricks (facings)

Sandlime bricks (facings)
Concrete bricks(facings)
Reinforced
concrete
(panels)
Natural stone
Rockwool
Ceramic bricks
Sandlime bricks
Concrete blocks
(1900 kg / m3)
Reinforced
concrete
(panels)
Lowest
Cost / m2 Energy
content
Initial
(finished
CE=
7.000kcal
wall)
Cost / m2
=29.3 MJ
Euro 65
-58
-50
-70
-60
24.5
96
16
2
-6
-60
-50
-40
1.5
24.5
9
6
16
-40
euro.50
-6
-40
Total
Euro
/m2
Aluminium 1 mm 3.70 kg / -38

m2
Steel 0.75 mm, 8.15 kg / -32
m2
Rockwool
-6
Reinforced concrete
-60
Concrete blocks
-58
Sandlime blocks
-65
Structural ceramics
-85
12
-32
1.5
28.8
10.8
16.2
44.0
-6
- 58
Lime-sand mortar
-65
0.6
Total
Euro
m2
-15
Cement-sand mortar
-18
0.6
-18
96
16
96/
Table 5.3 Comparision between different types of walls (adapted after Bekker)
The table shows that the cheapest solution for both load-bearing and non-load
bearing walls regarding embedded energy consumption is using the concrete
blocks.
The cheapest solution for facings are metal profiles manufactured from steel,
galvanized and painted. A facing made from concrete bricks has a lower energy
content. If the life time of concrete bricks were two times longer than that of
protected steel profiles, the energy content of both constructions in relation to
service time would be equal. The recycling ratio of steel profiles is almost one, and
of concrete bricks zero. However, the pollution, emission and process water
consumption of steel are higher than in a case of concrete bricks.
The application of reinforced concrete panels is the worst solution from the point
of view of energy consumption during the fabrication stage (of panels), from the
point of view of thermal comfort during lifetime using and from the point of view
of recyclability, but it has the advantage of applying the industrial production
concepts in constructions. The method allows fast erecting of the house in a short
time comparing with the concrete (masonry) solution..
Therefore, combining the advantages of both methods, and trying to eliminate the
disadvantages, we propose as a possible technical solution in housing production, a
technology to make panels from bricks. Some attempts have already been made in
Australia (Panel Brick Technology). The concept of "fast erecting" / "fast
dismantling" could be applied with success in housing industry and what is
important, the recyclability of the house could increase substantially, by using
similar methods with those used in automobile or home-appliances industries.
5.9 The feasibility analyse of production processes for housing
The large varieties of component parts of a house impose various types of
industrial production. Each one of industrial production has its own specific
management type.
Therefore, the manner of approaching technical/managerial aspects depends on the
end-product type technology. In order to adapt the actual production systems from
housing industry to reach the sustainability state requirements, a
technical/managerial assessment is necessary. By this assessment, are identified the
causes/effects that can influence, in one way or the other the production system
from housing industry. The analyse will be focusing on:
1) Present situation (managerial and technological) assessment regarding:
A. Producer's identification:
- Firm
- Size of the firm
- Location
- Market
- Production

for implementation
B. Component product of the house identification:

- Type of component products for housing (i.e. masonry products
limestone bricks, concrete bricks, concrete blocks, panels (reinforced
concrete, wooden, composite, other materials), cover (tiles, metal sheet,
wood), insulation, furnishings etc.)
-Range of product fabrication between housing market demand and
existing stocks
- Costs / product
- Level of competitiveness / product
- Material consumption / product
- Labour consumption / product
- Energy consumption / product
- Productivity of labour
- Inventory of the existing stocks
C. Housing Process Analyse:
- Technical feasibility analyse for assets (machinery, installations,
equipment, controls) to assess if it is easy not to modernise by adding or
changing part(s), quality control systems, energy saving systems and
environmental protection systems
- Inventory of the existing machinery, taking into account: degree of
complexity, number, types, position in the technological chain, degree of
usury, performances, energy-fuel consumption, productivity, level of
pollution
- Economical feasibility analyse concerning the appropriate costs for
maintenance/productivity of existent assets (machinery, installations etc.)
comparing with replacement costs
- Financial analyse, to check if there are financial means to support the
maintaining /replacing of the assets
- Ecological analyse of the process: to identify the sources of pollution and
the means to limits/avoid it
2) Future perspective considering:
- Management's improvement toward flexibility to meet the market
demands for environmental quality products;
- Human labour training for new technologies implementation, concerning
both quality of the work and care for environment,
- Acquisition of new machinery to replace the updated polluting ones, high
energy consumer construction machinery,
- Flexible technical organisation, to allow rapid changes in production,
- Quality control assessment of materials, products and processes at all
levels of fabrications,
- Integrated recycling systems for waste and disposals resulted from
various stages of the processes.
3) The required costs of implementation of the new technologies:

- Economic feasibility of production
- Sources of finances
- Presumed results after implementation
4) Expected results:
- Productivity improvement
- Market demand satisfaction
- Stockholders satisfaction,
- Personnel satisfaction
- Level of competitiveness
- Environmental regulations fulfilling (both for house and for production
for housing)
We could conclude that a managerial method of assessing the sustainability of a
process in a construction firm could follow the general procedure established by de
Ron (1996).
Planning and Organization
1 obtain management commitment (n.a. of the firm),
2 identify barriers and solutions,
3 set plant /construction yard wide goals,
4 organise project team,
Assess result: Assessment organisation established
Pre-Assessment
5 develop process flow chart,
6 evaluate inputs and outputs,
7 select audit focus
Assess result: Audit focus selected
Assessment
8 derive balances,
9 measurement of performance
10 assess causes of deviations,
11 generate improvement options.
Assess result: Comprehensive set of improvement options.
Feasibility studies
12 preliminary evaluation
13 technical evaluation,

for implementation
14 economic evaluation,
15 quality evaluation,
16 flexibility evaluation,
17 environmental evaluation,
18 selection of feasible options.
Assess result: List of feasible options
Implementation and Continuation
19 prepare implementation plan
20 implement feasible options,
21 monitor progress
22 sustain progress
Assess result: Sustainable Production (n.a. for housing)
The five steps assessment procedure, containing planning and organisation, preassessment, assessment, feasibility study, implementation and continuation, gives
companies a tool to determine their actual situation with respect to a sustainable
production and to set their goals (de Ron 1996).
Applying this methodology in Housing Industry, the interested construction firms
could adapt fast to the new laws and regulations concerning Environment (i.e. The
Netherlands has introduced Eco-Tax).
5.10 Conclusions
The sustainable house requires a sustainable production for housing. That means
that all technological parts of the technological chains must be improved. The
systemic approach house-production for housing allows the solving of the complex
problem of recycling housing. Following the experience in recycling that has been
developed in other industries (automobiles, home-appliances etc.), a solution for
recycling housing is possible. But that means to adapt to construction field, the
concepts of industrial production, usually used in other industries. That means the
concept "fast assembling/fast disassembling" for easy recycling.
Considering the house a system-component made from parts (each one being a
result of a production process of various industries), the recycling stage become
technically feasible.
The wall is considered the essential part of the house (besides structure), which
could impose the choosing of the housing-recycling technology. Traditionally, it is
made by bricks (limestone, concrete etc.). The solution offers a good flexibility in
the design of the house but does not offer a good recyclability. Other solutions are
regarding new composite materials resulted from industrial wastes, which are
proposed to substitute traditional materials (limestone, concrete). At the moment,
the practical sphere of application of these materials is still limited because of the
contractors reluctance.
Another solution is represented by panel assembling techniques.
The reinforced concrete panels, despite the advantages of being produced on an
industrial way and of permitting easy assembling, presents many disadvantages as:
they are high energy consumers, the thermal transmitance factor is high, they are
difficult to be recycled, and doesn't allow a flexibility in design of the house,
according to customer demand.
The wooden panels (already used on a large scale in USA and Canada), are a
solution, but they require also large quantities of wood or substitutive materials.
The wood (some species), presents the advantage of having a high regenerative
power, but this requires also time.
However, the present experience in the field is resuming to demolishing
techniques, the recovery factor is low. Important quantities of debris resulted from
housing demolishing are land filled. The solution is temporary and could transform
itself in a source of land-ground water pollution. The dismantling/disassembling
techniques are possible if the design of the house allow it, and if the process was
designed in such a way to permit re-manufacturing. Therefore, new concepts as
sustainable house and sustainable production for housing are welcome.
The "Housing Sustainability Dilemma", could have a solution, if the manner of
approaching is systemic: sustainable technology for housing together with
sustainable housing.
To apply in practice, both at microeconomic level (the firm level) and
macroeconomic level (economy of country) the concepts of sustainable production
for housing, a methodology to assess the feasibility of implementation the
sustainable production concepts for housing is proposed. It results that the
macroeconomic benefit and microeconomic profit are related each other through
the environmental aspects. It is obvious that the environmental aspects are as
important, or even more, then technical or economical aspects.
Chapter 6
Types of investments
Introduction
Project investments
Project definition
The necessity of programs and project investments
The programmes
Programme classification
The programmes system approach
Projects
The project system
Project documentation sub-system
The project investments result sub-system
Tipology and structure of project investment
The project management of investments
The project scope
The project objectives
Field criteria
Cost criteria
Time criteria
Quality criteria
The marketing mix of investment projects
The project as a product
The projects market
Project price
Promotion and publicity for projects
Conclusions
6.1 Introduction
As weve mentioned in the chapter 1, investment is a concept with a broad
definition. Usually it is related with the capacity of something to produce benefit in
the sense of profit or others. But what are the forms we meet investments in
everyday life?
A typical classification shows that investments could be:

- Project investments
- Capital investments
6.2 Project investments
Are those categories of investments related with something to be achieved
following a process which includes a project definition, feasibility studies or
business plans, project build-up, project operations, project turn-key, project
exploitation, project abortion?
For instance, project investments are usually encountered either in private business
or public investments. Examples of private project investments are numerous: a
plant, a shop, a mall, a gasoline station, a house, an office building or a residential
building or a group of them belonging to private investors or developers. In the
same way, public investments are a part of our every day life. Works of
infrastructure called also public works as roads, boulevards, highways, tunnels,
schools, parks, special constructions as dams, military installations or nuclear
plants are examples of project investments.
But what means projects?
6.3 Project definition
A broad definition shows that the projects are the way to achieve proposed
objectives following a logical succession of activities with the main scope to
materialize a corporal (tangible) or non-corporal (intangible) investment in
uncertainty and risk conditions.
Other definition is related with the fact that a project is a limited time organization
with a precise scope and objectives to be achieved in a specific time.
Therefore, a project means a:
- A project solving.
- Projecting and achieving objectives.
- Resources formation, allocation and consumption.
- Budget formation, allocation and control.
- Time scheduling.
- Risk and uncertainty.
- Quality, efficiency and effectiveness; Low impact on environment.
The five steps of a project are:
Planning activity that consists of: information, documentation and analyse,
project objectives, project description, activity and resources scheduling, action
mode.
Organization activity on a management type as hierarchical, matrix, network,

mixt and clients and suppliers relationships establishing.
Implementation meaning coordination and monitoring.
Control activity of the project progress and missing.
Project evaluation through the management by results (MBR), management by
objectives (MBO) and management by exceptions (MBE). In this step there are
also corrective measures, if necessary, and a report for conclusions and
evaluation is completed.
INVESTMENT PROJECTS
Environmental projects
Real estate projects
Research and development

projects
Intellectual property
projects
Public administration projects
Tourism and agro-tourism

projects
European Union integration

projects
SMEs projects
Infrastructure projects
Informatics projects
Defence and public order

projects
Education development projects
Agricultural development
projects
Figure 6.1 Types of projects
Industrial and commercial

development projects
6.4 The necessity of programs and project investments

Lately, in Romania and in the world, as well in the European Union, project
investments gained in importance because they are considered the engines of
economies. If the project investments miss, the economies stagnate. On the other
hand, investments are related with financing, and therefore there must be
established credible project management structures.
It is well known that basically all major political actions for Romanias integration
in the European Union and NATO are within specific programmes. It is also
known that any investment that has as scope the building works, technology
acquisition or selling, technology build-up, trade activity development, tourism and
leisure facilities building, education, health and public order facilities build up or
rehabilitation or modernization has as their base, the projects and the programmes.
But what are the approaches and the differences between programmes and
projects ?
6.5 The programmes
The programmes are complex projects or more precisely they are project portfolios
that have the main goal the achievements of established objectives through policies
and strategies at macro or microeconomic level of national or international
importance.
As it showed in the project management standards and project investment
glossaries, the programms are:
a series of specific tasks intercorrelated and lead in a coordinated way to
achieve objectives based on specific policies, strategies and tactics;
a portfolio of projects selected and planned in a coordinated way to achieve a
major objective based on a strategy
a complex project or a set of uncorrelated projects which are linked in a
business cycle
an organization with a temporary mission with the purpose to achieve a medium
or high level complexity process;
a part of a plan (for example, the programme for research and development and
the stimulation of innovation from the National Research and Development
Plan for Sustainable Development of Romania. The programme has its own
budget.
6.6 Programme classification:
After the level of analyse :
International Level Programmes as: The programme of Romanias
integration in EU, NATO, bilateral, trilateral, multilateral cooperation
programms, scientific and technical, commercial, cultural, space
programmes, educational EU programmes as Socrates, Leonardo, Minerva

etc.
National level programmes as: The Sustainable Development programme of
Romania till 2020, The continous education programme, Danube Delta
conservation and rehabilitation of the eco-bio-system programme, Public
administration programmes, programmes for transportations, agriculture,
SMEs etc.
Regional and local programmes as : programmes for regional development,
programmes for professional reconversion of unemployed, programmes for
development for the less developed areas etc.
Organizations level programmes or internal programmes of public
administration institutions, companies NGOs.
After the source of finance
Programmes with external financing from international financial institutions
as IMF, World Bank, UNIDO, IBRD, EBRD etc.
Programmes with internal financing (from public budget, from banks from
Romania etc.).
6.7 The programmes system approach
The programmes could be considered complex systems of projects through which
the financial resources , human resources, material, technical and energy resources
that were established by adequate policies and strategies are materialialized and
brought profit and beneficial effects. As we could see from the next figure, the
framework for these policies sustain the strategies, the strategies at their turn make
the correlation between financing and other type of resources (human, material
etc.) on programme bases and the projects are the focused objectives to define
beneficial effects.
Policies
Strategies (1,2,3)
Financial sources (efforts)
Programmes (1,2,3,)
Projects (1,2,3)
Effects (profit, other benefits as
social, environmental, economic
benefits that sustain
developmen etc.)
Figure 6.2 System approach of programmes
On policies bases, one or more strategies are established with proposed objectives
to be achieved at defined times and the allocated resources. A good example is the
Integration Strategy of European Union for the new members for which the period
of time was established as 1 may 2005 for the admission of new member states as
Cech Republic, Hungary, Poland, Baltic States Estonia, Lituania, Latvia, Cyprus,
Malta, Slovenia, Slovakia) and in 2007 Romnia and Bulgaria. To achieve the
objectives for integration important financial resources were allocated. To facilitate
the pre-adheration process and the integration process, many programmes were
established. This programmes are either general or specific. For instance, we could
mention general programmes as Phare which consists of different specific
components as for education: Socrates, Erasmus, Leonardo, Minerva, for research
and development (R&D) framework programme 5 and 6 (FP 5, FP 6), for
agriculture SAPARD, for transportation ISPA, for SMEs etc.
Concluding that each programme consists of two or more projects we have a broad
view about what the programmes mean.
6.8 Projects
Projects means the way, we could say the vehicle through which human, financial,
materials, technological resources are organized in a specific manner to achieve
objectives in a field of activity , with characteristics, cost and time restrictions,
following a standard life cycle and beneficial changes defined by quantitative and
qualitative objectives1. The projects could be also parts of the programmes or
research and analyse directions of programmes.
6.8.1 The project system
A systemic approach of projects make understandable the project process, project
life cycle, project stages. For example, in the figure 6.3 the project system is
presented.
PROJECT
PROPOSAL
THE PROJECT
DOCUMENTATION
THE PROJECT
RESULT
If the result is feasible, a new project

proposal
Figure 6.3 The project system
The project proposal sub-system

The project is consisting of sub-projects. Altough the project proposal is based on
an identified problem to be solved with one or more sollutions. For the project
proposal made by a government authority, public administration, private investors
etc. will be one or more offers from consultancy companies or entrepreneurs to bid
the project and one or more offers to execute the project works (for example
construction works taken by general contractors in the same mechanism of bidding.
For the project bidding process public publicity is required. All the bidding process
are based on the competition principle for the best offerings from the point of view
of project and project works quality, time for completing, financial resources
availability, costs of the project, economic, ecologic and social benefits. General
practice says that usually exists one offerer and more project contractors. The
project offering launch it is itself a process of transmitting the project requirements
for project proposal2 applications that imply scheduled time for project offering
launch and project proposal apllication admitance. Although, for a project launched
1
2
SR 13465:2002- PM Romnia Glosar pentru managementul proiectelor (authors translation)

oferta de propuneri de proiecte- call of proposals (l.englez)
by a project offerer a programme which assure the financing could exist one or
more project appliers. In the case the offerer conditions are fulfilled by more
appliers a bidding competition will be organized. The elected project will have to
prove that it is the most financial feasible, or the project that will fulfill the ofertant
requirements. For certain types of projects as those with public financing or from
structural funds received from European Union, selection stages process and
bidding procedure are required. The project applications will not be confound with
the project agreed to be financed.
One or more
solving
variants
PROBLEM
TO BE
SOLVED OR
NECESSITY
Offerer
Project proposal
Problem
solving
One or more
sollutions
Project
contractors
Figure 6. 4 Project proposal sub-system
6.8.2 Project documentation sub-system

The project documentation sub-system consists of an ensamble of written notes,
calculus, descriptions, analytic metodologies and indicators, approvals, contracts
etc, and drawings as sketches, plans, project drawings. Some of them contains also
virtual elements as data bases, drawings, sketches, plans all of them on a magnetic
support (CDs or optical disks).
The project is characterized by the existence of three distinct elements:
1. project life cycle,
2. project stages,
3. project phases.
NB. We have to note that we are reffering to the project documentation not to the
physical effect of a project which could be a building, a construction work for
infrastructure, a technology making or acquiring an information system.
100%
finish
testing
control
extension
realization
contracting
planning
ideea
feasibility
STAGE 1- project
definition
STAGE 2project planning
Phases:
- necesity- scope
- project ideea
- conceptualization
- project filling
- feasibility study
- project strategies
- approvals
Phases:
- planning resources
- cost establishing
- base project
- contracts and terms
- detailed planning
STAGE 3proj. execution

Phases:
- team work
- project tasks
bidding and
aquasitions for
project
- project finish
- phase control
STAGE 4project control and evaluation

Phases:
- testing
- internal
evaluation
- external
evaluation
analyse project
result
- dissemination
results
Phases:
- internal financial
control
- external financial
control
- project extension
Figure 6.5 Project life cycle, stages, phases (adaptated by the author CSB after the
model PMBOK-Project management for success in teaching and learning)
As we note from figure 6.5, the project life cycle could be divided in four principal
stages:
1. project definition,
2. project planning,
3. project execution and
4. project checking
each one with some phases.
6.8.3 The project investments result sub-system
The result of an investment project represents the materialization of the object of
the project. For instance, any construction needs a complex project that implies
(sub) projects of the component parts of the building. As well as the documentation
project the investment project has its own project life cycle with stages as follows:
1. project launch,
2. feasibility studies and approvals,
3. project execution (the building itself),
4. project start-up,
5. project object using (investment exploitation),
6. pay back period, project amortization,
7. project rehabilitation or project renewing or

8. project abandon or post-using (demolishing and material recycling).
6.9 Tipology and structure of project investment
As weve noticed before, some projects are component parts of complex projects
called programmes. Other projects are on their own bases have independence of
financing.
To a better understanding of the project investment typology a classifiaction is
wellcome.
The project investment could be classified in the following groups:
after the degree of complexity:
complex integrated projects or independent,
simple projects.
after the financing source:
private investment financing projects (with own resources and borrowed
resources),
public investment financing projects,
mixt public-private investment financing projects (public private
partnership investment projects).
after the object of project investment:
construction investment projects (new constructions and buildings,
constructions and buildings rehabilitation works, construction
modernizations etc.) with customers in private and public sector,
new product project (goods, industrial products, agriculture products,
services etc.),
informatic projects (softaware, expert systems, web design, web engines
etc.),
telematics projects (hardware and software for telecommunications and
informatics),
industrial development projects,
human resource development projects,
infrastructure development projects (highways, bridges, airports, tunnels,
etc.),
energy developement investment projects (hydrodams, nuclear plants, gas
and cole energy centrals, wind energy projects etc.).
after the economic domain and the final user:
project investments for education and learning,
project investments for public health,
project investments for industry,
project investments for agriculture,
project investments for tourism,
project investments for energy sector,
project investments for environment (pollution reduction, prollution
prevention, environmental damages rehabilitation, clean industry
development and eco-services as eco-tourism, reforesting etc.),
project investment for public administration,

project investment for defense and public order, border strenghtening etc.
after the project scheduled time:
long time project investment ( more than 5 years),
medium time project investment (1-5 years),
short time project investment (under 1 year).
Any project investment contain three main parts from which two are on a graphic
support, a module with notes and data, one module with drawings, plans, sketches,
and one on a magnetic support (virtual data bases, plans and drawings on virtual
environment.
A project consists also of legal, technical, economical, financial and environmental
and in the case of public investments social-human analyses.
A model of the structure of the project investment is presented in the followings,
figure 6.6:
PROJECT STRUCTURE
WRITTEN
DOCUMENTATION
MODULE
(description, calculus,
tabels, analyses, prefeasibility studies,
feasibility studies, valuation
reports contractes, etc.)
TECHNICAL
DATA
Charateristics,
novelty, technical
realizability
tehnique, quality,
fiability
DRAWINGS
(sketches, drawings, plans
etc.)
LEGAL DATA
Ownership rights,
full or partial, work
relationship,
Legislation for
work, working
contracts,
commercial
contracts, industrial
property etc.
ECONOMIC
DATA
Value,costs,
income, profit,
amortization,
management
organization etc.
Figure 6.6 The structure of an investment project
VIRTUAL PART
(data bases,
drawings, written
parts on magnetic
support- cd-s,
optical disks etc)
EVIRONMENTAL
DATA
Impact studies,
Level of pollution,
laboratory tests and
measurementsrecycl
ability, ecoeficiency
6.10 The project management of investments

The concept of project management of investments defines all the activities as:
- Project planning
- Project organizing and allocation of resources (human, technical,
financial)
- Monitoring project evolution (project in progress)
- Project evaluation and control during execution with the purpose to
achieve the objectives of the project, function of the following criteria:
- Field, cost, time, quality.(see figure 6.7)
PROJECT
SCOPE AND OBJECTIVES
PROJECT INVESTMENT
MANAGEMENT
FIELD
COST
TIME
QUALITY
Figure 6.7 The project management objectives and criteria
6.10.1 The project scope

Represents the finality, the object of a project, either physical or virtual.
The scope of the project is established in the beggining.
6.10.2 The project objectives
A project investment could have one or more objectives .
The objectives of the project could be economical, technical, financial, quality
improvement, time, efficient and effective using of human resource, environmental
impact reduction, organizational improvement etc.
Objectives are formulated in the initial phase of the projects, and re-assesed during
the execution and finishing of the project. For assesing the project evolution, some
indicators will be used.
The way of reaching the objectives depends on the clarity and coherence of
formulating project scope and objectives and on the project team behaviour
concerning organizational aspects, professional attitude, comunication between
team members, levels of authority, motivation, personal implication of project
managers, of financing conditions, complying with contractual terms etc.
6.10.3 Field criteria
Historically, the Project Management concept appeared in the 1960s as a
consequence of NASA space programmes development in the USA. The
foundation of planning graphic instruments as GANTT3 or PERT4 graphs/charts
and their application in practice together with MBO (Management by Objectives)
techniques had a major importance in developping Project Investment Management
in a science on its own base.
Beside space research and conquest applications, other fields of expertise have
developed their project investment management techniques. We can mention
constructions, industry, agriculture, transportations, trade, tourism, IT project
management and the list could be extended with new developments.
The first step in developing a project is the aqurate identification of the application
field (research, education, industry, constructions etc.)
We should mention, if the project is a green field project that means the proposed
investment project will start with a new construction on a land that is first time
used for this purpose or a development project meaning that on an existing capacity
or building, improvements and modernization works are made.
As a consequence, we should note that it is important to make the connections
between the field of applications of the project investment, on its own
specifications and it is the practical way to do it in terms of project management
team, activity planning, evaluations and control of results.
6.10.4 Cost criteria
At the beggining of any project, a cost forecasting balanced by estimated benefits is
required.
Obviously, the general trend is to forecast minimum costs to maximum benefits,
but in practice is better to consider feasible costs to feasible benefits. Therefore a
report of optimum is required between efforts and effects. For example, if the
3
4
Chart GANTT invented by Henry L. Gantt. This chart is also named horizontal bar chart.
PERTs Chart (English acronym for Programme Evaluation Review Technique) project planning
is done with the activities displayed by arrows and nodes.
investment project has as a principal objective the mass production or something

(cars, cloaths, electrodomestics etc.) the first strategy will apply (minimum costs to
maximum profitability). If the investment project is to make luxury products, or
products to sustain a trade mark name or a brand name, the second strategy is
useful (optimum costs to expected quality products). Lately, in the cost criteria
entered all the environmental costs divided in eco-design costs, environmental
costs to minimize pollution during project execution and using environmental costs
for recycling the discarded products.
The cost criteria should involve also the costs with borrowing the investment funds
(credit costs).
For this reason, at the project investment initiation, a forecast budget of incomes
and spendings and a forecast cash-flow5 analyse is required. The technique is called
DCF (Discounted Cash Flow). Based on the analyse results the decision whether to
invest or not in a specific project is taken.
The costs at the beggining of the project are forecasted costs and the costs at the
project end are historic effected costs.
The cost criteria are important for a decision concerning a project investment but
these aspects have to be balanced by the other criteria as field, time, quality.
We have also to note that costs are influenced by taxes as general taxes,VAT
(value added taxes), eco-taxes. In Romania the general taxes for investments have
the following values acording to the Fiscal Code from 1.01.2004:
1. If the company that generates the investment has a turnover less than
2 millions lei (50000 euro) the tax will be on annual turnover and will be
1.5 % from turnover and the VAT will be not considered.
2. If the company that generates the investment has a turnover more than
2 millions lei (50000 euro) but less than 100000 the tax will be on annual
turnover and will be 1.5 % from turnover and the VAT will be for paying;
3. If the company that generate the investment has a turnover more than
4 millions lei (100000 euro) the tax will be on profit and will be 25 % from
profit and the VAT will be considered.
6.10.5 Time criteria
Time is also an important criterion for project investment management. Although,
as well as in costs case, at the beginning of the project investment a time estimation
is necessary for all the phases of the project: estimated time to do the project
documentation, including project plans drawings, technical notes, legal acts,
feasibility studies, evaluation reports, estimated time for project execution and
completion, estimated time for pay-back period, estimated time for using the
project investment, estimated time for post-using (demolitions, recycling etc.)
5
cash-flow - or liquidity flow
The time schedule is possible now in a modern way by using specilized software as
Microsoft Project Management or Primavera. These programms puts in a friendly
way graphic instruments for project and activity planning as GANTT, PERT,
resource histograms, costs reports, workforce reports, technology using reports etc.
Time criterion is also important in corelation with investments fund risisng, activity
completting, quality assurance, human and technical capital efficient and effective
using. Therefore this criterion has to be linked with other criteria as field, costs,
quality.
6.10.6 Quality criteria
The concept of project quality is a complex one because it embadded three distinct
elements as:
1. The quality of project proposal, the quality of feasibility studiy, the quality
of the team that make the project documentation and feasibility study.
2. The quality of the project as a plan and the project design team.
3. The quality of the result of the project (product, service other forms of
investments as tangibles or intangibles (brand name, patents, industrial
design etc.).
In many situations project quality is assesed according with International standards
as ISO 9000 series for quality management and products, ISO 14000 series
standards for environmental management, ISO 19000 series for both (quality and
environment), project management standards, national or european technical
standards as romanian STAS, EU standards etc.
The quality factor for projects is a definitory element at the most feasible project
selection but it must also be linked with the other factors as field, cost, time.
In the project management process for investments the quality assesement is made,
on course, of the project at the level of intermediate activities or final activities.
Appreciation factors could be considered as: contractual time respecting,
minimizing costs, project financing, feasibility of the project, viability of the
project, product and project sustainability, customer satisfaction etc.
6.11 The marketing mix of investment projects
The marketing mix concept introduced by Phillip Kotler is based on the 4P
Product, Place, Price, Promotion/ Publicity. In the field of investment projects, this
concept is present too. As a specific characteristic for marketing mix of
investments we should note that we have in fact two objects to analyse:
1. The marketing of the project design
2. The marketing for the object of the project, either a bulding or construction
works or a product for domestic or industrial use or service.
We have to observ that the second is included in the first as any project contain a
marketing analyse. In some cases we could consider that the marketing projects are
themselves investment projects because, for example, if the promotion or publicity
is made professionaly the succes of the projected product is assured. The marketing
projects have the same characteristic criteria of any project. That means it also has
a scope (purpose), objectives, costs, time and quality.
For each of the 4P of the investment project marketing mix- product, place, price,
promotion there are specific policies, strategies, tactics. Each one of them will be
mentioned in the projects and will have a proper analyse.
Policies for
PROJECT MARKETING
MIX 4 P
Product
Place
Strategies for
Price
Tactics for
Promotion/Publicity
Figure 6.8 The marketing mix of investment projects (adapted by C.S. Bnacu 2004
after P. Kotler)
6.11.1 The project as a product

The project itself could be considered a product as well as the other products being
under competition on the projects market, a market that has tenders, contractors,
financial institutions as banks or investment funds, project designers, consultants,
customers, suppliers etc.
6.11.2 The projects market
The projects market is usually related with the scope and objectives of the project.
As the specific characteristics of the projects are broad or narrow, the market could
be large or restrained. For example, for an educational EU programme as Socrates
or Erasmus could be many applicators from schools, high schools, universities
which compete between them but in specific classes. Schools will compete with
other schools, high schools will compete with other high schools, universities will
compete with other universities. Obviouslly, all the appliers will be from the
educational system.
If the competitors for a specialized project from construction field are competing,
they will bid or compete in the limits of their specialization and competence.
Builders will compete builders, Road contractors will compete other road
contractors, installation specialists will compete other installation specialists.
The taking of projects is directly in the case of private financing or in an open
bidding for the projects with public budget financing.
The project offerers are called also contractors and could be international
organizations as European Comission, USAID, UNO, UNIDO, NATO etc.),
national (Romanian Government ministries etc.), public or private organizations,
etc.
The aplliers for projects are called contratee and could be
institutions, NGOs, legal pearsons qulified in the field.
universities, r&d
The financial instituions are banks, investment funds or in some cases foundations.
6.11.3 Project price
The price of the project could be of two types: forecasted price and effective price.
The forecasted price is based on the forecasted discounted costs at which could be
taken into consideration costs that represents the risk marge of the project
entrepreneur.
The effective cost is based on direct and indirect costs to make the projects and
adding profit after completing the project.
6.11.4 Promotion and publicity for projects
Promotion and publicity process of projects means media advertising (newspapers,
journals, radio, tv, INTERNET).
The promotion campagne will include the deadline for application of proposals
with the specification of objectives, costs, time scheduling and resouces.
Succesfully investment project application in the bidding process will agree to
settle contracts for financial support. These contracts will be established between
contractors and financial institutions, between contrators and contractees, between
finacial institutions and insurance companies etc. In these contracts time, quality
and costs clauses are compulsory to be mentioned.
In the situation that the investment project has a public funding base, the process of
promotion consists of:
- project offering,
- open bidding,
- aquisitions for project.
6.12 Conclusions
Investments could be: project investment and capital investment.
A project is a part of a programme and it means a way to achieve proposed
objectives following a succession of activities with the main scope to materialize a
corporal (tangible) or non corporal (intangible) investment in uncertainty and risks
condition.
To define a project we need to solve a problem starting with projecting objectives,
allocate resources, budget formation, time scheduling.
The five steps of a project are: planning, organization, implementation, control and
evaluation. Programmes are complex projects and could be international, national,
regional, organizations, level.
Chapter 7
The influence of time on investments

The discounting technique
The calculus of discounting indicators
The reference moments for discounting
7.1 The influence of time on investments

In the field of investments, time represents the main factor of achieving the
investment projects objectives as an entire process from design phase to
completing the project, using and post-using is time dependent. For this reason it is
assumed that it is a dynamic process.
On the other hand, influences as the fast technological development, a dynamic
market based on competitive supply and demand, the abundance or scarcity of
material resources and energy could influence in time the costs to make the project
viable, costs of using or production costs, costs of post-using (demolishingdisassembling or recycling) of an investment object.
Therefore, it is necessary to evidence the importance of the time factor in the
investment process.
The investment project process has the following phases:
time to do the project design and to make the feasibility studies,
time to do the construction works or acquisitions of technologies according to
the project scope and objectives,
time to reach the projected parameters by the investment (in case that it is a
production unit),
the payback period of the investment funds or - using time of investment,
amortization time of investment,
post-using time (demolishing or disassembling and recycling).
The importance of establishing a relationship between investments and time is
useful for:
the optimization of the cost-time function in planning investments,
the best using of the capital invested,
to find the influence of physical and moral depreciation of assets used in the
project,
to find the optimal time using of investment
The time to elaborate the investment project design and documentation, the time to
complete the feasibility study and the construction works or acquisitions of
technology are starting phases of any investment project.
During the project elaboration phase the invested capital funds are minimum.
(2-7%) from the project value, but on the time of making the project the funds
embedded are greater and are related with the project evolution process.
There are three types of financial funds allocation for projects:
1. investment rising funds on project advancing process-(the mathematical
representation is a parabol y= a+ bt+ ct2);
2. investment rising funds on line project advancing process the investment funds
are constant during the time (mathematical representation y= a+bt )
3. the investment funds are allocated in a decreasing way on the project progress in
time, the investments are lesser and lesser (the mathematical representation is a
hyperbola y= kt / a+t ) a, b, c= are the function coefficients,
investiments
III
II
I
time
Figure 7.1 The allocation of investments funds as the project progress
7.2 The discounting technique

As weve mentioned before, the investment process life cycle is consisting of
phases and stages that are time dependent as: the project design and documentation
for feasibility studies project build up project object start up, payback, project
using, project object demolishing/ dismantling and recycling.
The investment funds are spended in a short period of time (1-3 years) comparing
with the exploatation time which could be for (5-10 years for technologies,
10-50 years for buildings etc. and profit is also time dependent. Therefore a
dynamic analysis is needed and the best technique is the discounting technique.
An easy way to understand this technique is to give a simple example:
Suppose that at the beginning of the year we invest 1 leu or 1 euro in a specific
business. At the end of the year well have the profit a. The same for the next years
as results from the next table 7.1
Year
Invested sum
1
2
3
...
h
...
d-1
d
1 leu or 1 euro
1+a
(1+a)2
Profit at the end of the Total

year
a
1+1.a
(1+a)a
1+a + (1+a)a= (1+a)2
(1+a)2a
(1+a)2 + (1+a)2a= (1+a)3
(1+a)h-1
(1+a)h-1a
(1+a)h-1+(1+a)h-1a = (1+a)h
(1+a)d-2
(1+a)d-1
(1+a)d-2a
(1+a)d-1a
(1+a)d-2 + (1+a)d-2a= (1+a)d-1

(1+a)d-1+ (1+a)d-1a = (1+a)d
Table 7.1 The formation of discounting factor
Analysing the data from the table it results that an invested sum today will be over
the h years (1+a)h
The expression (1+a)h is called the compounding factor or fructification factor of
the invested capital and it is noted with fc with the condition (fc>1)
On the opposite, if a monetary unit (1 leu or 1 euro or 1 $) invested at the present
moment will become (1+a)h over the h years the present value of a monetary unit
will be in the year h 1/ (1+a)h that we note with fd and it is called the discounting
factor (z<1).
We note with y = x (1+a)h the total sum accumulated over the h years with x the
present invested sum expressed in lei or euro and with a the actualization or
discounting ratio.
Note that: a = discounting coefficient discounting factor fd=
1
(1 + a ) h
a> ri+ra+rr where:

a= discounting coeficient and could be in tables on paper or magnetic support
ri = inflation rate
rd = interest rate
rr = risk rate
In usual calculation a= 0,15 but a specific analysis is requested. In some cases a
could be the annual rate of interest.
The using of fc or fd in the calculus of the indicators as investments, profit, yield
payback depends on the establishing of the reference moment.
If a value (investments, profit etc.) was assessed in the moment before the
reference time, the discounting factor will be used.
If a value (investments, profit etc.) was assesed in a moment after the reference
time, the discounting factor will be used.
Nota Bene. If the discounting factor is used, h takes the values 1,2,..t
If the compounding factor is used, h takes the values 0,1,2,..,t-1.
In the both cases t means the period of time between the moment of discounting (in
the first case) or compounding (in the second case). The indication h=0 means that
the invested sum that will be discounted was at the end of the previous period
(year, semester, trimester month etc.).
As a general conclusion, to better understand the way how the discounting
technique is working we could use the formula:
y = x (1 + a ) h
(7.1)
that means:
The future investement value = The present investement (1 + a) h
The present investement =
The future investement value

(1 + a) h
and also
The present investement = Past investement (1 + a ) h
The present investement
Past investement =
(1 + a ) h
(7.2)
7.2.1 The calculus of discounting indicators

The discounting indicators as profit, investments, net present value ratio, could be
calculated as follows:
1. The total discounted profit (discounting at the start-up moment p) where Ph
means the annual profit in the year h, and D means the Duration (time) for
efficient using of investment object. Therefore,
D
P p ta =
h =1
we note
S=
h =1
(1 + a ) h
Ph
(7.3)
(1 + a ) h
and use the geometric progression sum relationship
S p = a1
1 qn
1 q
(7.4)
a1 = the first term

q = the progression rate
n = no. of the progression terms
Applying the relationship (7.4) in the expression (7.3) we have the total discounted
profit:
ta
= Ph
(1 + a ) D 1
a (1 + a ) D
(7.5)
Nota Bene The discounting factors are found in special tabels called discounted
tabels (see annexes).
If we make an investment calculation and consider future moments (for example
the moment when the investment object will be out of use) the total profit will be
calculated with the formula:
D 1
Pta = Ph f d
v
(7.6)
h =o
where fd is the discounting factor

We have to consider the fact that the progression sum for moments calculations
will be:
s = 1 + (1 + a ) + (1 + a ) 2 + + (1 + a ) D 1
(7.7)
s=
(1 + a ) D 1
a
(7.8)
As a consequence, the profit relationship (7.6) will become:

h
D 1
Pta = Ph (1 + a ) = 1 + (1 + a ) + (1 + a ) 2 +...+(1 + a ) D 1
v
Pta = Ph
v
(7.9)
(1 + a ) D 1
a
7.2.2 The reference moments for discounting

The reference moments for discounting are related with the investment project life
cycle. Therefore to have a complete image of the invested money value at different
moments on project life cycle we should consder:
discounting at the investment decision moment (lets call it the m moment),
discounting at the moment when investment works are beggining (lets call it
the n moment),
discounting at the project investment start-up (lets call it the p moment),
discounting at the payback moment (lets call it the u moment),
discounting at the moment that investment ends its useful life (lets call it
the v moment).
To be more specific, we should consider a simple scheme to illustrate the
discounting moments on project life cycle:
D
d
g
m
f
p
time
Figure 7.2 The project life cycle moments for discounting
In the previous figure (7.2) g means the project design, documentation and
feasibility study time, d means the investment project object build up, f means the
payback period and D the total useful investment object time.
To use properly the discounting technique a certain methodology based on seven
steps for calculations is useful:
1. By first, we establish the indicator that we should calculate in a basic static
form.
2.
Secondly, we establish the reference moment for calculations; we note the

reference moment with 0.
The third, we represent the indicator on the axe.
The forth, we could use (but not compulsory) geometric figures to illustrate
the indicators evolution for investments and profit.
The fifth, well use the indicators calculation formula but taking into account
the number of years which must be comprised between the moment when the
actualization is made and the reference moment.
We use the progression sums relationships as follows:
3.
4.
5.
6.
(1 + a ) 1 and
1
=
h
h =1 (1 + a )
a (1 + a ) D
D
z=
(7.10)
(1 + a )D 1
z' = (1 + a ) =
D1
h =0
a
7. The seventh, well make the economic analyse and we give a suitable
interpretation for results,
A. Discounting at the investment decision moment (m)

We want to find the next indicators:
Ita (Discounted total investment in the point m),
Pta(Discounted total profit in the point m),
Ra(Net present investment value ratio); Ra =
Ta(Discounted payback); Ta =
Pna Pta
=
1
I ta
I ta
I ta
Ph
Therefore, we apply the above mentioned methodology:
P P
Fig 7.3 Discounting at the investment decision moment (m)
The discounted investment at the moment m is:

g+d
g
d
1
1
1
I
I
=
I
h h
h h
h h
h =1 (1 + a )
h = g +1 (1 + a )
h =1 (1 + a )
I ta =
m
(7.11)
The discounted profit at the moment m is :
Pta =
m
g+d +D
h =1
g+d
g+d +D
1
1
1
P
I
=
I
h h
h h
h h
(1 + a )
h =1 (1 + a )
h = g + d +1 (1 + a )
(7.12)
The net present value of investment ratio Ra at the moment m is:
Ra =
m
g +d + D
Ra =
m
(1 + a )
g + d +1
g +d
(1 + a )
h = g +1
Pta
I ta m
(7.13)
Ph
1
or Ra =
m
(1 + a ) D 1
(1 + a ) g + d
a (1 + a ) D
g+d
Ih
h = g +1
(1 + a ) h
Ph
1
(7.14)
Ih
The discounted payback

To calculate this indicator we make the assumption that the payback is the (T)
moment in which the total discounted profit is equal with the discounted total
investment.
Although, the formula for total discounted investment at the m moment is:
I ta =
m
g + d + Ta m
h = g + d +1
(1 + a ) h
Ph
(7.15)
Making the assumption that the profit is either constant on the analysed period or it
is considered to be the medium profit on a forecasted period (particular case for
calculations),
I ta = Ph
(1 + a )
(1 + a ) T
g+d
a (1 + a )
1
T ma
(7.16)
By continuing the calculations we establish the equality:
(1 + a ) T
Ph
Ph a I ta (1 + a )
m
g+d
(7.17)
and then we extract T (the payback):
Ta =
m
log Ph log Ph a I ta m (1 + a )
g+d
log(1 + a )
(7.18)
B Discounting at the investment object works start up at the moment (n)

We follow the methodological steps and build the geometrical representation as it
is presented in the next figure:
n=
f
T
P P
Figure 7.4 Discounting at the investment object start up at the moment (n)
We calculate the indicators:

1. Ita (Total discounted investment at the moment n),
2. Pta (Total discounted profit at the moment n),
3. Ra (Total net present value of investment ratio) R a =
4. Ta(the discounted payback period) Ta =
Pna Pta
=
1
I ta I ta
I ta
;
Ph
5. Revised discounted investments and spendings K a = I ta + C ta

6. Specific revised discounted investments and spendings k ta
I n ta + Cn ta
=
qhD
Total discounted investment at the moment n (Itan) will be calculated using the next
formula:
d
1
n
(7.19)
I ta =
I
h h
h =1 (1 + a )
In the same way, we will find the total discounted profit at the moment n (Ptan) as
follows:
Pta =
n
d+D
(1 + a ) h
h =1
Ph
(7.20)
During the execution period of the investment project object, there is no profit for
the case that the project couldnt be divided in sub-projects that allows partial startups. For this case the mathematical relation to determine the total profit is:
Pta =
n
d+D
h =1
(1 + a )
P
h h
h =1
(1 + a )
P =
h h
h = d +1
(1 + a ) h
Ph
(7.21)
If we consider a constant profit over the time or a medium profit we have:
(1 + a ) 1
1
d
(1 + a )
a (1 + a ) D
D
Pta = Ph
n
(7.22)
Another important investment indicator is the net present value of investment ratio
that we will calculate for the moment n (Ran). The mathematical expression is:
Ra
Pta n
= n 1
I ta
(7.23)
If we make the assumption that forecasted profit is constant or if we consider a

medium profit over the projected investment time, well have the formula:
(1 + a ) 1
1
d
(1 + a )
a (1 + a ) D
1
d
1
I
h h
h =1 (1 + a )
D
Ph
Ra =
n
(7.24)
The discounted payback period at the moment n (Tan) is obtained like in the
previous case (moment m for discounting) equalizing the discounted investments
with discounted profits as follows:
I ta =
n
I ta = Ph
n
d +T na
1
P
h h
h = d +1 (1 + a )
(1 + a )
(1 + a ) T
n
a
1
d
(7.25)
a (1 + a ) T
(7.26)
Ta =
n
log Ph log Ph I ta (1 + a ) d a
n
log(1 + a )
(7.27)
The discounted total cost of investment at the moment n is given by the next
formula:
K ta = I ta + Cta
n
(7.28)
where
d
1
I
h h
h =1 (1 + a )
I ta =
n
(7.29)
and
Cta =
d+D
h =1
(1 + a ) h
Ch
(7.30)
Applying the formula results:
Cta =
n
d+D
1+ a
h =1
C
h h
h =1
(1 + a )
C =
h h
h = d =1
(1 + a )
C = Ch
h h
(1 + a ) d
(1 + a ) D 1
a (1 + a ) D
(7.31)
So in the end we have:
d
d+D
1
1
1
I
I +
+
=
C
h h
h h
h h
h =1 (1 + a )
h =1 (1 + a )
h =1 (1 + a )
d
K ta = I ta + Cta =
n
Ch
(1 + a ) d
(1 + a ) D 1
(7.32)
a (1 + a ) D
Specific discounted total investment costs kan are established with the following
mathematical ratio:
I ta + C ta
n
ka =
n
d+D
qh
h = d +1
(7.33)
or if we report total investment cost to the annual turnover ATh and annual total
spendings TSh well obtain:
(1 + a ) 1
1
d
(1 + a ) a (1 + a )D
=
1
ATh
D
d (1 + a ) 1
(1 + a )
D
a (1 + a )
D
TSh
ka
(7.34)
C. Discounting at the start up moment (p) for investment project object

To estimate indicators:
1. Ita (Total discounted investment at the moment n),
2. Pta(Total discounted profit at the moment n),
3. Ra(Total net present value of investment ratio) R a =
4. Ta(the discounted payback period) Ta =
Pna Pta
=
1
I ta I ta
I ta
;
Ph
5. The loose of profit Pp = I ta I t

p
d 1
h
(1 + a ) I h I t
p p = h =0
It
6. The specific profit loose
Like in the previous cases we will use the investment geometric diagram to
understand and visualize the relationship between project life cycle and investment
calculations.
f
T
P P
Figure 7.5 Discounting at the start up moment (p) for investment project object
We will have the following indicators:

Total investment at the moment p (Itap) where Ih is the annual investment:
d 1
I ta = (1 + a ) h I h
p
(7.35)
h =0
The total profit discounted at the moment p (Ptap) is:
1
P
h h
h =1 (1 + a )
D
Pta =
p
(7.36)
If we make the assumption for a medium forecasted profit well have:
Pta = Ph
p
(1 + a )D 1
D
a (1 + a )
(7.37)
The total net present value of investment ratio (Ra) for the moment p is given by
the next formula:
d 1
h
(1 + a ) I h
I ta
h =0
= p 1 =
1
D
(
Pta
1+ a) 1
Ph
D
a (1 + a )
p
Ra
(7.38)
The discounted payback time (Tap) is obtained as follows:
I ta
(1 + a ) 1
1
=
P = Ph
h h
D
h =1 (1 + a )
a (1 + a )
D
T pa
T=
log Ph log Ph a I ta
log(1 + a )
(7.39)
(7.40)
The profit loose (Pp) caused by risky investments can be calculated with the next
formula:
d 1
Pp = I ta I t = (1 + a ) I h I t
p
h =0
(7.41)
In the same way we determine the specific profit loose:

- The profit loose for an invested monetary unit 1 leu, 1 euro,1 $, 1 sterling pound,
1 yen (pp)
d 1
h
(1 + a ) I h I t
p p = h =0
It
(7.42)
- If we relate the profit loose with the production/ services capacity unithat we note
with (pp), well have:
d 1
h
(1 + a ) I h I t
p 'p = h = 0
q ht
(7.43)
- If we relate the profit loose with the forecasted turnover (FT) that we note with
(pp), well have:
d 1
h
(1 + a ) I h I t
p p = h =0
FTt
(7.44)
D. Discounting for the payback period-moment (u)

The geometrical investment representation is presented:
u=
T
I
P1
Figure 7.5 Discounting for the payback period-for the moment (u)
The discounted total investments at the moment u (Itau) are represented by the
following equation:
d + f 1
I ta = (1 + a ) h I h
u
(7.45)
h =0
d + f 1
f 1
d + f 1
h =0
h =0
h =f
I ta = (1 + a ) h I h (1 + a ) h I h = (1 + a ) h I h
u
(7.46)
The total discounted profit for the moment u (Ptau) contain the split profit (P1) and
(P2) related with the time moment we have as reference:
Pta = P1 + P2
u
(7.47)

f 1
P1 = (1 + a ) h Ph
(7.48)
h =0
D f
P2 =
h =1
f 1
1
P
(1 + a )h h
(7.49)
1
(1 + a )f 1 (1 + a ) D f 1
P
=
P
h
h h
h =1 (1 + a )
a
a (1 + a ) D f
Df
P u ta = (1 + a ) Ph +
h
h =0
(7.50)
The net present value of investment ratio for the moment u (Rau) is:
u
Ra =
u
Ra =
Ph
Pta
1
u
I ta
(7.51)
(1 + a )f 1 (1 + a ) D f 1
a
a (1 + a ) D f
d + f 1
h
(1 + a ) I h
(7.52)
h =f
The discounted payback period for the moment u(Tau)

We have two cases:
1. The investment amortization is less then the payback (Tau<f) and,
2. The investment amortization is higher then the payback (Tau>f)
In the first case, the mathematical expression is:
u
I ta = Ph (1 + a )
u
Ta =
u
I ta
(1 + a )Ta 1
a (1 + a )Ta
(7.53)
log Ph (1 + a ) f log Ph (1 + a ) f aI f ta
and for the second case:

u
log(1 + a )
(1 + a )f 1 (1 + a )T a f 1
= Ph
u
a
a (1 + a )T a f
from which T is determined by logarithmation.
(7.55)
(7.54)
E. Discounting at the end of project investment object using at moment (v)

The geometrical representation of investments taking as a base for calculations the
moment v is presented in the next figure:
v=0
I
P
Figure 7.6 Discounting at the end of project investment object using at moment (v)
The investment indicators will be calculated as follows:

Total discounted investments for the moment v (Itav)
d + D 1
D 1
d + D 1
h =o
h =0
h =D
I ta = (1 + a ) h I h (1 + a ) h I h = (1 + a ) h I h
v
(7.56)
Total discounted profit for the moment v (Ptuv)

D 1
Ptu = (1 + a ) h Ph = Ph (1 + a ) s = Ph (1 + a )
v
h =0
(1 + a ) D 1
(7.57)
a (1 + a ) D
or
Pta = Ph
v
(1 + a ) D 1
a
(7.58)
The investment net present value ratio (Rav)

v
Ra =
v
Pta
1
v
I ta
(7.59)
Ph (1 + a )
D
Ra =
v
(1 + a ) D 1
a (1 + a ) D
d + D 1
h
(1 + a ) I h
(7.60)
h =D
The discounted payback period (T)
I ta =
p
D 1
h =DT va
Tva
1
h
h =1 (1 + a )
(1 + a ) h Ph = Ph (1 + a ) D
(7.61)
From this equation we could obtain T by logarithmation as weve made in the

previous cases.
Chapter 8
Bank indicators for feasibility

studies and business plans
The role of national and international financial institutions in

Romanias economic transition and intergration in European
Union
Methodologies for investment project evaluation of international
and national financial institutions (IBRD, EBRD)
Feasibility studies and business plans structure and
characteristics
Opportunity studies
Pre-feasibility studies
Feasibility studies
The evaluation report
Economic and financial analyses for the feasibility studies and
business plans
The investment costs assessment
The analyse based on centers of cost
Financial analyse of investment projects
Bank indicators to assess the feasibility of project
Conclusions
Themes to be solved by the students
8.1 The role of national and international financial institutions in Romanias

economic transition and intergration in European Union
Romania is now in a synergic evolutive development process for accessing to the
European Union in 2007. This process is not easy taking into account the economic
transition after 1989, from a central planned economy to a functional market
economy. We have to keep in mind that the Romanian economy has to reduce the
gap in development comparing with other EU members. This process could be
difficult without proper investments in infrastructure, industry and services
development and modernization, education, health, agriculture and environment
protection and preservation.
In this period, national and EU programmes are developing as Phare, Sapard, Ispa,
Socrates, Cost, Ceres etc.
The investment funds are used for:
The rehabilitation, modernization and development of the economic
infrastructure in industry, agriculture, constructions, transportations, health
and education;
Technology and know-how transfer for ITC, plants, machinery and
instalallations that are of high technical performace, non-polluting, ecoefficient technologies in EU and international standards of quality;
The development of SMEs;
The restructuring and privatization of the companies that were state owned;
The build-up of new facilities with private or public destination;
The positive economic effects of using rationally, efficient and effective the
investments funds borrowed from the international financial organizations are:
Economic synergic development of the Romanian economy to EU economy;
The macroeconomic stability which allows economic sustainable development

and progress to new economy of modern information society; the diminishing
of the inflation rate and credit for investment development;
The creation of new workplaces in production and services and reducing

unemployment;
Growing-up the standards of life by rising the power of consuming of

population;
The (re)qualification and (re)specialization of the workforce;
The improvement of the environmental quality with direct positive effects on

humans health;
There is a major responsability in using borrowed funds for investments aquired

from international financial institutions. If the investment funds are not used
rationally, efficient and effective, the economic effects negative and are expressed
in:
the diminishing of activities in some domains because of bankrupt;
inflation;
instability;
rising of bank interest that slow investment processes;
unemployment;
lowering the power of consumption and living standards;
the diminishing of the foreign investors trust through the risk rate rising.
As a consequence we could say that it is very important that the borrowed funds
from national and international organizations to be used properly and effective in
order to have an important positive role in one economic development, either at
microeconomic level or macroeconomic one.
When an organization asked for funds for investment projects the bank requested a
business plan or feasibility studies in order to minimize the risk of improper usage
of the borrowed funds.
In Romania, the methodologies for feasibility studies used by financial institutions

could be:
own methodologies of Romanian national banks as (BRD, BCR, Bancpost etc.)
normative methodologies used for public investments created by Ministries as
Finance Ministry and Public Works, Habitation and Transportation Ministry;
international financial institutions methodologies as The World Bank, IBRD1,
EBRD2, UNIDO3
8.2 Methodologies for investment project evaluation of international and
national financial institutions (IBRD, EBRD)
A. The characteristics of IBRD methodology
To stimulate the economic development of the states especially of the developing
countries, the international comunity has created a financial institution called IMF4.
This institution has specialized organisms which contribute with currency funds,
technical asistance, technology and know-how transfer, financial and economic
consultancy etc. to impulse the economic growth in the economies of the
developing countries which required this.
The organism specialized on investments of IMF is IBRD.
IBRD was settled at 25th of June 1946 with the scope to help states economies to
recover after the World War II and to assure an economic development. Presently,
the main role of the bank is to offer loans to assure the economic growth of less
developed or developing countries.
IBRD - International Bank for Reconstruction and Development

EBRD - European Bank for Reconstruction and Development
3
UNIDO - United Nation for Industrial Development Organization
4
IMF - International Monetary Fund
2
The credits provided by IBRD are mainly oriented to finance programmes to

support investment projects in:
macroeconomic restructuring and privatization;
infrastructure rehabilitation and development (roads and highways, bridges,
airports, electric plants etc.);
social effect investments (education, continuing learning, health, (re)qualification
of the work force, health etc.);
environmental rehabilitation, pollution abutment, environmental protection.
To be able to give loans, IBRD constitutes funds based on primary and secondary
sources.
Primary sources are constituited from capital subscriptions, net borrowing from
international financial markets and from net income from own activity.
Secondary sources are constuited from loans paybacks and from liabilities sellings
to other investments.
The right of borrowing investment funds depends on the countrys subscription. A
countrys subscription is established on the bases of the agreements between the
solicitors country and the bank. The value of subscription depends on the
economic and financial state of the applying country and it is related with the
participation to the International Monetary Fund. At the afilliation to the IMF, the
country pays 10% from its subscription (from which 1% in gold or USD and 9% in
the countrys currency in discounted value).
The fund available for a bank member is based on the votes number, (minimum
250 for each country) to which is added a 100.000$ deposit at IBRD for each extra
vote. The higher number of votes gives the right to the management staff positions
of the bank. Each state member IBRD has a representant in the Guvernors Council.
The interest rate of the bank depends on the offer and demand level of of the
financial markets.
The banks total turnover could be calculated with the next formula:
Vt = V p + Vi + Dc + Ca Cvr ( Cad + Di + Ce + Cc )
where:
Vt = Total income
Vp = Income from capital placements
Vi = Income from loans
Dc = Interests from comissions;
Ca = Comissions from aranjaments;
Cvr = Comissions for special reserve;
Cad = Administrative spendings,
(8.1)
Di = Payed interests for banks borrowings;

Ce = Spendings for notes, bills emissions;
Cc = Spendings for assets
When a credit is requested, the banks ask for a feasibility study with the following
conditions:
9 The project objective must be contained in the general development strategy
of the country
9 The level of economic efficiency is assessed by IBRD indicators (NPV, IRR,
Cash-flow, Breakeven, Benefit/Cost)
9 The degree of covering the necessary resources of the investment project
9 Market demand for products and services of the future investment project
objective
9 The payback period (total or partial)
The feasibilty studies that are made after the IBRD methodology represents
complex studies containing technical, economical, financial, social, environmental
impact studies. At the set up of feasibility studies after IBRD methodology some
aspects are focusing on:
The economic aspect in which a particular attention is given to the way the
funds are administrated with maximum efficiency and effectiveness and the
way investment funds are used. We have to note that the IBRD methodology
used for projects in Romania underlined the distinction between the economic
analyse and financial analyse. The reason is that the economic analyse means
the investment project evalluation from the effects on economy perspective.
Meanwhile, the finacial analyse is also an economic analyse but with the
characteristic that reflects the financial aspects of the business enterprise.
The organizational aspect the management of the company applies for a
credit, with specifications about geographical location of the company,
companys history, management, level of employees qualifications, the
posibility of the company to specialize local people that will be used at the
project investment execution and exploitation etc.
Technical aspect of investment project with reference to investment object
placement, localization, existent and future production capacities, quality and
product performance, service capabilities etc.
Environmental aspect the relevant impact of the investment project on
environment concerning water, air, soil pollution, subsoil or bio-systems
hazards, the recycling capabilities for wastes, and energy economising.
The commercial aspect and the aquisitions policy concerning the supply/
demand relationship for products or services that will be the result of the
investment project and the aquisitions of raw materials, energy, components or
sub-components.
The financial aspects through the cuantification of financial results based on

the consumed funds evaluation and on the forecasted discounted cash flows.
At the settings of incomes and spendings, the subventions and taxes are taken
into consideration.
We have also to note that according the IBRD methodology for feasibility studies,
both the economic analyse and the financial analyse are made with the goal to find
the optimum variant of investment project after analysing more variants on a
comparative basis.
B. EBRD or the European Bank for Reconstruction and Developement is an
international financial organism established in 1991 with the role to support
economic and financial assistance to the Central and Eastern states in their
transition to market economy.
The loans from EBRD are mainly used to finance the development of the private
sector especially for SMEs but also for public investments project as infrastructure
development.
The feasibility studies according to the IBRD and EBRD methodologies Studies
have the content as follows:
introduction,
project history,
legal framework,
sector and subsector,
economic agent (the applying company),
marketing analyse
technical and technological analyse,
environmental impact analyse for investment project as well as for resulted
product or service,
economic analyse including the cost of impact,
financial analyse with references to forecasted costs and financial sources
(owned or borrowed) for future activity,
sensitivity analyse,
risk analyse.
8.3 Feasibility studies and business plans structure and characteristics

Behrens & Hawrenek5 (1991), identify three distinct phases in the project of
investment life cycle, each one having several steps. The first phase is
pre-investment with the stages:
Identifying stage in which the opportunity studies and support studies are made.
The preselection stage in which the pre-feasibility studies are made.
Preparation stage in which feasibility studies are made.
The evaluation stage in which the valuation report is completed.
The next is the investment phase with the stages:
Negociation and contract.
Engineering project design.
Construction works.
Pre-Production, Marketing.
The operational phase is the third phase and it contains the stages:
Commisioning and project investment object reception.
Rehabilitation/ replacement.
Innovation; expansion.
8.3.1 Opportunity studies
The opportunity studies are used to quantify the parameters, informations, and data
needed to develop the project idea and are refearring to: natural resources, future
demand for the product or service; the environmental impact; the competition on
the local market; the possibility to integrate production locally or internationally;
the general investment climate; estimated general costs and benefits.
The opportunity studies could be:
Opportunity general studies which at their turn may be: on geographic area, on
industry, on field of using.
Opportunity specific studies with direct reference to the object of the project
investment.
Suport studies which have the following classification:
Market studies.
Supply studies.
Laboratory tests.
5
Behrens W., Hawrenek P.M. Manual for the preparation of industrial feasibility studies 1991,
ONUDI - Vienna
Placement studies.
Environmental impact studies (especially at the investment projects at chemical
plants, facilities and installations, paper plants, petroleum refinary, foundry
plants, nuclear plants, hydro-electrical and thermical plants).
Studies Economies of scale evaluation studies to determine the best size for a
plant, factory etc. which have to be the most economic after taking into
consideration the costs of investments, costs of production, prices of
technologies etc.
Studies for selection of machinery, installations and equipments that include
technical characteristcs, bids, contracting, supplying, aquisitions or leasing etc.
8.3.2 Pre-feasibility studies
In the pre-investment stage is necessary to make a pre-feasibility study which have
a similar structure with the feasibility study except for the more general
informations contained in the study.
The pre-feasibility studies contains eight parts:
1. The strategy and scope of the project
2. The market and the marketing concept
3. Materials and raw materials
4. Placement, place and environment
5. Engineering and technology
6. Organization and unexpected costs
7. Human resources
8. Implementation scheme and budget
8.3.3 Feasibility studies
The feasibility studies are complex technical- economical- environmental studies to
justify an investment project.
The term feasibility is coming from english language and means that is worth
investing in something for an expected benefit (profit or others).
Usually at the making of a feasibility study participates a team with professionals
from various domains: economics, marketing, accounting, law, engineering,
sociology, environmentalists etc. as the complexity of the project required this. It is
not necessary to make a feasibility study for any investment.
For small investments, the banks ask for a business plan which have a simplified
structure comparing with the feasibility study and in which the accent is put on the
economic, financial and risk analyses.
The banks ask for feasibility studies for a large project investment, especially in the
public sector for infrastructure works, big capacities of production which require a
very aqurate analyse.
Usually feasibility analyses are oriented to bidding systems for project investments.
The structure of the feasibilty studies are similar with the structure of prefeasibility studies but more detailed. This time, the estimations must bring a
prooved aquracy and to take very seriously into consideration the economic
analyse, the financial analyse, the risk analyse and the impact assessment.
In the componence of a feasibility studies there are nine parts:
1. The company background, the need of the project, placement of the investment
object
2. The marketing analyse, customers, competition, supplying policy
3. Engineering and technology
4. Organization, management
5. Economic analyse and Financial analyse
6. Sensitivity analyse
7. Environmental analyse
8. Risk analyse
9. Project implementation and evaluation
8.3.4 The evaluation report
The setting up of the evaluation report take place after the feasibility study was
accomplished together with its main objective, the verification of the investment
funds correct using and effective allocation according to the written contracts
between parts (the bank and investors or contractors).
On the other hand, a feasible location analyse is performed in order to determine if
the investment object is correctly placed.
For example, if an industrial objective has access to communications ways, raw
material supplying, if the produced products have a market, if there are enough
customers etc.
8.4 Economic and financial analyses for the feasibility studies and bussiness
plans
The economic and financial analyses are important elements to determine the
feasibility of an investment project either at a microeconomic level or at
macroeconomic one.
Usually, the economic analyse have the functions of:
companys valuation in order to prove the capacity of the firm to make the
project and to payback the loans borrowed from the bank for investment set up;
to analyse the costs of investment project. For this reason, the costs are
separated on costs centers. The forecasted costs are also taking into
consideration in order to find the total cost of the project.
To establish the return of the project by analysing some economical and financial
indicators as IBRD indicators: gross income, total spendings, benefice-cost,
discounted cash flow, Net Present Value (NPV), Internal Rate of Return (IRR),
Bruno Test, breakeven point.
At all those up mentioned, from the sustainability point of view, we could add also
the evaluation function of the cost of the environmental impact for which we take
into account the sustainability indicators.
As methods of work, the Cost Benefit Analyse (CBA) and the Life Cyde Costing
are useful in dealing with the investments projects from the Sustainable
Development perspective.
A systemic approach for the economic analyse in investment projects evaluation
takes into account6:
1) The economic analyse of the investment project based on comparassions with
similar or alternative variants of projects from the total eco-efficiency
perspective (profit+ environmental and social benefit).
2) The establishing of the planning horizon of the investment projects activities and
split it up in times easy to control and monitoring at fixed dates.
3) The estimation of the cash flow profile for each variant of project.
4) The establishing of minimum rate of return.
5) The establishing of criteria (economical, environmental, technological or human
social) for accepting or rejecting a project proposal.
6) The Sensitivity analyse.
7) The Risk and uncertainity analyse.
8) The acceptance or rejecting the project proposal based on benchmarked scores.
Hendrickson C. Tung A. Project management for constructions, Prentice hall, New Jersey 1989
USA
9) The economic quantification of the investment object impact on environment on

short term (less than a year), medium term (1-5 years) or long term (more than
five years).
8.4.1 The investment costs assessment
According to the methodologies for feasibility studies for investment projects
which are used now in Romania, that are present in legislation7 or according with
the methodologies IBRD, EBRD or UNIDO, the assessment of the investment cost
means the total cost of investment divided in:
1. project design costs (technical project, manual of instructions, etc.), including
also costs with the opportunity study, with the pre-feasibility study, with the
feasibility study, costs with the bidding documents, costs with technical
assistance etc;
2. construction costs including the greenfield costs (in the case of a new building
or construction that will be developed on a land that requires to be prepared in
order to be used);
3. aquisition and leasing costs for machinery and equipments;
4. testing costs;
5. other costs; including environmental impact costs on project life cycle.
8.4.2 The analyse based on centers of cost
The investment project costs consists of direct costs and indirect costs. According
to the methodologies for feasibility studies of IBRD, EBRD, UNIDO or World
Bank any investment project must have an analyse based on centres of costs for
any product. The centers of costs8 are the next:
centers of costs for production: contain costs linked to main industrial
operations;
centers of costs for services: contain costs for auxilary services needed for a
good functioning of the investment project as transportation costs, raw
materials aquisitions, spare parts, reparations and service, machinery and
buildings maintaining costs, depository costs,etc.
centers of costs for administrative and financial operations: all activities linked
to managerial planning, control and results evaluation.
Normele Metodologice privind continutul cadru al proiectelor pe faze de proiectare al documentelor

de licitatie, al ofertelor si al contractelor pentru executia investitiilor nr.1743 / 69 / N / 1996 ce a
nlocuit Normele metodologice 792 /13 / N / 20 iunie 1994)
8
Metodologia ONUDI si metodologia Bancii Mondiale- buletin editat de BRCE S.A.
8.5 Financial analyse of investment projects

Through the financial analyse of investment projects the analyst will check:
the total cost of investment,
the necessary working capital;
the financing plan for investment project;
the effective and proper allocation of investment funds according to specific
periods of time for project execution;
the finacing sources for the project grouped on own sources and borrowed
sources;
the income/spendings ratio
the investment project breakeven
the financial internal rate of return (FIRR),
the financial risk caused by: inflation, bank interest evolution, currency risk,
bankrupcy of main clients or suppliers, bad investments, and also to other
factors as climate change, resource depletion, meteorological or seismic
hazards, strikes etc,
the costs/ project with environment.
8.6 Bank indicators to assess the feasibility of project
The financial vialbility of an investment project is anlysed by the following
indicators:
1. General Turnover
2. Total cost
3. Cash-flow
4. Net Present Value (NPV)
5. Benefice cost ratio,
6. Internal Rate of Return (IRR).
7. Bruno Test
8. Breakeven point
1. General Turnover: It is an indicator which expresses the total income from main
production, auxilary production and services and aquired credits.
2. Total Cost: it is an indicator based on cumulating the investment costs with
spendings (production costs, workforce, raw materials, energy, less amortization
costs).
Cth = I h + Ch (8.2)
where:
Cth = Total cost for year h
Ih = Investment in the year h
Ch = Production costs or Exploitation costs on year h
3. Cash-flow
The cash-flow is an important indicator in the economical and financial analyse for
feasibility studies or bussiness plans. It could be based on historical data but
usually it is based on forecasted data. Curently, it shows the gain or loose by using
efficient or non-efficient of the investment funds. Keeping in mind the reference
moment for analyse, the cash-flow is discounted so the method is called also The
Discounted Cash Flow or (DCF).
The relationship for calculations is:
CFh = Vh (C h + I h )
(8.3)
where:
CFh
= the annual cash-flow
Vh
= the income in year h
Ch and Ih = costs and investments in the year h
From the sustainable developement perspective and by transforming the present
companies into eco-companies that perform eco-efficient activities the relationship
for cash-flow calculations could become :
CF eco h = Vh + Vheco (C h + I h ) + C heco + I heco
)]
(8.4)
where:
CFeco h = eco cash-flow
Vh
= the income in year h (because of production or exploitation)
Ch si Ih = costs and investments in the year h
Vheco = the income in year h (because of ecologizing production or exploitation)
Checo = the costs to reduce pollution (at the project or company level) and the
diminishing the consumption of non-regenerative material and energy
resources and recycling activities stimulation.
Iheco
= company eco-investments to prevent pollution and promote design for
environment for products and packaging and /or to develop ecotechnologies and alternative sources for energy.
It is true that for a restructuring and transition economy as Romanias it seemed to
be a luxury to invest in environmental technologies, but measures have to be taken
and starting with BAT Principle (Best available technology) and gradually
developing or aquiring eco-efficiency technologies the present situation is going to
be changed to eco-efficiency. A good model is given by advanced countries that
reached high standards in eco-technologies in Europe like the Netherlands,
Sweden, Germany, France, Britain or USA, Canada and Japan.
On the other hand, new European Directives as 2002/96/EC WEEE, 2002/2/95/EC

RoHS, for Waste management, 94/62/EEC Packaging Waste, 84/360/EEC for air
pollution, Regulation EC / 2037/2000 for Ozone Layer, 80/68/EEC protection on
groundwater against pollution, 85/337/EEC&97/11/EC Environmental Impact
Assessment and 2001/42/EC assessment of plans and programmes impose an
eco-civic behaviour of companies in the EU. Otherwise, according to 75/442/EEC
Framework Directive on Waste, fines up to 12 million euro, daily fines up to
120.000 euro imprisonment of up to ten years will constrain companies. Therefore
is a tremendous need for romanian companies to adapt to the new environmental
conditions and restrictione.
4. The Net Present Value (NPV). The way of determining the NPV is based on
discounting the forecasted incomes after the object of the investment project is
put into work.The mathematical relationship is:
NPV =
d +D
h =1
I h + C h d + D Vh I h C h
=
h
(1 + a ) h
h =1 (1 + a )
h =1
d +D
Vh
(1 + a)
(8.5)
where:
NPV= Net Present Value,
Vh = the income gained in the year h
Ih = annual investment
Ch = annual spendings (annual cost)
a
= discounting coefficient
The condition for a project investment to be accepted and financing by a bank is
that NPV>0. This indicator is important to express the capacity of the investment
project to bring profit on its whole life cycle.
This indicator is not an efficiency economic indicator since the comparision
between efforts and effects it is not assured.
5. The benefice- cost ratio is an indicator that well find within the next formula:
d +D
R=
Income
=
Cost
Vh
(1 + a)
h =1
d +D
I h + Ch
h
h =1 (1 + a )
(8.6)
with the condition R>1

If R = 1 the project of investment will cover the costs but will not bring profit;
If R < 1 the project of investment is economically unfeasible;
If R > 1 the project of investment is economically feasible.
Nota Bene The relationship (5) is used especially to private investments where
principal criterion is to obtain profit.
This relationship is not used for public investment projects where the benefit is
other than profit (i.e. environmental, social etc.). Therefore, for public investments,
other analyse to be performed is called the Cost Benefit Analyse (CBA).
In this case the most favorable ratio is given by the next relationship:
R=
Total benefice (economical, environmental, social) Private cost

Public cost
(8.7)
with the condition that R >1

6. The Internal Rate of Return (IRR) is an indicator which could be both
economically (the economic rate of return- ERR- and financially expressedFinancial rate of return FRR. This indicator is obtained by equalising NPV with
0, that means investment costs equals investment incomes.
NPV = 0
d +D
Vh
(1 + a)
h =1
d +D
I h + Ch
(1 + a)
h =1
(8.8)
Vh I h C h
=0
(1 + a ) h
h =1
d +D
The investment projection selection on the IRR bases it is made practically by

comparing different variants of investment projects similar from the point of view
of characteristics with the analysed project. The displaying of results could be
either on an analytical way or a graphical reprezentation.
The method to determine IRR analitically means to project a NPV (+) which is
correspondent to a minimum discounting rate (amin)- for exemple a = 10 % or
a = 15% and of a NPV (-) that correspond to a maximum discount rate (amax)- for
example a= 20% or a=30%.
Then we use the relationship:
IRR = a min + (a max a min )
NPV (+)
NPV (+ ) + NPV ()
The result is graphically presented like in the figure 8.1
(8.9)
NPV
NPV(+)
amax
IRR
Discounting rate a
amin
NPV (-)
Figure 8.1 IRR diagram
The methodology for finding the IRR:

Step 1. First of all we establish:
- amin and amax on testings,
Step 2. Second, we make the correspondance:
- amin and amax are coresponding to NPV (+) respectivelly NPV (-),
Step 3. Third, the difference between amin and amax must be not more than 5% as
weve considered a liniar evolution which in reality is parabolic.Therefore,
the value of IRR will be adjusted always to minus.
The IRR indicator is important as it shows if the project investment project brings
profit over the project life time.
For an investment project to be financed by a bank, theere are conditions such as
IRR > Opportunity cost of capital. The World Bank recommend a minimum IRR of
10 %.
7. The Discounted Currency ratio (The Bruno Test) is an indicator which reflects
the ratio between the value of investments expressed in local currency (ROL9)
and investments made in foreign currencies (Euro, $, Yen, Pound etc.) in a
discounting way. This indicator is useful especially for companies that make
import/export operations.
The relationship for calculations is given below:
d+D
Rna =
ROL- Romanian Leu
I h + Ch
(1 + a )
h =1
V * h ( C * h + I * h )
(1 + a ) h
h =1
d +D
(8.10)
Where Ih and Ch are annual investments and annual costs expressed in ROL and
V*h, I*h and C*h are the incomes and production or exploitation expressed in foreign
currrency.
8. The Breakeven point (BP), is also an indicator which shows the business level in
production or services became feasible.
The Breakeven diagram
PROFIT
Income and costs
75
Breakeven
point
BP
50
Variable costs
Cv
25
Looses
Fixed costs
Breakeven
step
The annual turnover
Pe
Economic
contribution
100
Cf
0
25
Unfeasible production
50
Production
100 (%)
75
Feasible production
Figure 8.2 The diagramme of breakeven point
The relationship to determine the breakeven point is given by the system of

equations obtained by the geometrical analyse for 2 x 2 triangles which are
similary according to the geometrical characteristics (side-angle-side). So we could
have the system of equations:
y
Unfeasible production( x)
=
100
Variable cos ts
Unfeasible production = Fixed cos ts (Cf ) + y
100
Annual TurnoverAT
(8.11)
solving the system we obtain:
Unfeasible production( x) =
Cf
100
AT Cv
(8.12)
where:
CF = Fixed Costs (amortizations, general fixed costs, Taxes, WATT, salaries etc.)
CV = Variable costs (raw materials, energy etc.)
AT = Annual Turnover.
If the approach for project investment feasibility is made from the sustainability
point of view, the breakeven point we will find on a Paveto type diagramme in a
three dimensional representation as it shows in figure 8.3:
Incomes
and costs
ECO- PROFIT
An
Tu
PROFIT
100
90
80
Cv
70
60
50
Cvec
LOOSES
ENV.LOOSES
40
X'
30
20
Cfec
10
classical
breakeven
Cf
Pro
Pareto curve
Pareto
optimum
0
Environmental
friendly production
and business
Figure 8.3 The breakeven diagramme based on project investment eco-efficiency in a

tridimensional representation (C. S. Bnacu, 1997)
In this case,
X' =
Cfec
100
Pmec Cvec
(8.13)
where:
Cfec = Fixed costs to ecologize production (business): Eco-taxes, Ecological
Tradable Permits (ETP), eco-qualification and specialization of employees.
Cvec = Variable costs to ecologize production (DFE-Design For Environment
products, eco-equipments aquisitions and of new apparatus to ecologize
the existence production processes, costs with recycling technologies,
costs with environmental rehabilitation etc.)
Pmec = Annual turnover based on eco-profit from the sustainable production by
lowering the costs with differentiated eco-tax to the pollution levels,
incomes from trading the pollution rights, incomes from trading the
recyclied wastes, income from energy costs economy by using low energy
consumption technologies.
The optimum point will be find in a Pareto Diagramme, therefore the real point of
sustainable production will be:
SPx =
( )
X2 + X'
(8.14)
8.7 Conclusions
Romania is now on its way to European Integration, therefore investments are quite
important.
Usually the application for project investments credits requires a specific
documentation as business plans or feasibility studies depending on the size and
importance of the investment and the amount of money requested.
Business plans and feasibility studies are made according to methodologies
imposed by the financial institutions and they have a structure that consists of a
company presentation and history, project utility and scope, other sources of
finance, management and organization, a marketing analyse, a technical analyse, a
legal analyse, an economic and financial analyse, an impact assessement analyse, a
sensitivity analyse and a risk and uncertainity analyse.
The investment projects are compared in order to determine the most feasible one.
To find the best alternative of a project investment, international and national
organisations use economic and financial indicators as, turnover, total cost,
cash-flow, Net Present Value (NPV, benefice cost ratio, Internal Rate of Return
(IRR), Bruno Test, Breakeven point.
As the environmental problems as: pollution, resource diminishing and depleting,
ozone layer diminishing and climate change, etc. became a matter of concern for
the entire society, the European States and the developed states have taken hard
measures against the companies lacking in eco-civic behaviour. Therefore, we must
to consider the feasibility of projects from both profitability and eco-civic
behaviour which in certain situation could become sources for profit too.
8.8 Themes to be solved by the students
1.
2.
3.
4.
What a feasibility study is?

Explain the phases and stages of an investment project.
Which indicators are used to determine the best sollution for an investment?
Exemplify the impact assessement on an investment in the following situations:
a gas station, a recycling plastic factory, a new product on the market
(a refrigerator or a computer).
5. Imagine that you are an entrepreneur who wants to start a business in: a) plastic
waste recycling; b) aluminium packeging recycling; c) mobile phone batteries,
d) paper waste recycling, e) automobile recycling. What will you do with a
10,000 euro investment in such business. How will you do the business plan?
Exemplify.
Chapter 9
Risk and uncertainty analysis

for investment projects
The necessity of risk and uncertainty analysis

Economic criteria to analyse uncertainty and risks for investment
projects
Sensitivity analysis
Forecasting methods for investment projects
Conclusions
Themes for students
9.1 The necessity of risk and uncertainty analysis

An investment project means a present financial effort for future benefits (effects)
and this means that is time dependent. As the future is uncertain and on the period
of time could appear many changes caused by many different factors (economical,
technological change, environmental, human behavior, meteorological, political,
social etc.), it results that any investment project is subject, more or less, to risk not
to be finished in time or not to be finished at all, or the costs to be overpassed than
the initial forecasts. Therefore, an analysis for risk and uncertainty is needed. But
what is the difference between risk and uncertainty?
The Risk means a situation in which the projects objectives havent been reached
partially or totally because of different causes such as economical, social, political,
technological evolution or environmental to which the probability of appearing
may be estimated or is allready known.
Uncertainty has the same definition as risk has, with the difference that the
probability of appearance of upmentioned causes (economical, environmental,
human, social, political, technological etc.) is not known.
The objective of the risk and uncertainty analysis is the identification of the
potential and real factors of risk and finding the means and instruments to
Risk and uncertainty analysis for investment projects
minimize it. To minimize risk a good system of information of the factors that
could affect the investment object is needed.
The methodologies of Romanian Banks (B.R.D, B.C.R, Bancpost, Raiffeisen etc.)
and international (I.B.R.D, E.B.R.D, U.N.I.D.O) or the Romanian legislation
(Ordinance 792/13 N/1994 of M.L.P.A.T) underline the necessity of making
provision funds to minimize the risk of investments.
As a consequence, the using of the analysis of risk and uncertainty in the
elaboration phase of feasibility studies is quite useful as the execution of any
investment project implies several categories of risk (economical and financial,
technological, environmental, human error, geographical, political, social etc.).
A classification of risks shows that the investment project risks could be:
- systematic - the result of investment project could be affected by factors that
affect also other economic activities as the modification of the interest rate,
inflation with direct influence in prices changing, changes in demands on the
internal and external markets for certain products and services, climate change,
earthquake, floods, raw material and energy resource depletion, new restrictions
from laws changes, new eco-efficient and cheaper technologies that makes
existent technologies to be morally obsolete,
- non-systematic - the result of investment project may be affected by the
management of the company or by the project management team, a non adequate
policy and strategy of the company, time delaying in project activities, overcosts,
overpays etc.
Levels of risk. In management and economic books concerning risks it is
mentioned that there are three levels of risk: low, medium and high, as well as five
categories of risk (very low, low, medium, high, very high). The categories of risk
are:
Very low risk (5-7%) for example the risk of governmental bond acquisitions,
Low risk (10 %) investments in making known products from food industry,
Medium risk (15%) investments in developing the range of existent products
(passing from Pentium 4 to Pentium 5 microprocessors),
High risk (20-25 %) the launch of a new product on the market (i.e a new type
of car),
Very high risk (over 25-35 %) research and development activities for new
products or fundamental research, new inventions.
We could establish a relationship between the level of risk and an economical
product life cycle. Although, it is known that a product has an economical life
cycle with the following phases: launch the new product, product growth, maturity,
decline, renewing, abandon.
Market
demand
Level
of risk
maturity
Product
marketing
costs/ incomes
from sellings
renewing
New product
Known
product
decline
growth
launch
abandon
time
optimum
time
Figure 9.1 The economical life cycle of product and the risk level
The connection between the product life cycle and the level of risk is good to be
known when taking a decision concerning an investment project for a new product.
It is true that the influence of the risk could be minimized when exists proper
product policies, product strategies and product tactics in what may concern the 4 P
(product, place-market, price, promotion and publicity).The influence of new
technologies appearance with higher quality, cheaper and energy efficient is a high
risk for obsolete technologies. Many times, due to the fast advance of science and
technology and innovations (revolutionary inventions) breakthroughs, this puts on
risks companies that are not adapting fast. The new products will hurry the decline
of the old technologies and products.
9.2 Economic criteria to analyse uncertainty and risks for investment projects
The analysis for uncertainty and risk is based on methods used in statistic analysis
of data concerning the evolution of indicators as incomes, costs, cash-flows etc.
There are also used forecasting analyses, marketing analysis, games theory etc.
The range of criterias (some of them) to analyse uncertainty and risks for projects
is consisted of:
Bayes-Laplace criteria,
Maximin criteria,
Maximax criteria,
Hurwicz criteria,
regretes minimax criteria.
The Bayes - Laplace criteria is based on the supposition that the probability for
equalizing the level of demand for certain products or services, that are offered by
different project investment, that have diverse production capacities, implies a
different demand.
For example, suppose that we have four types of investment projects for production
plants of different capacities, for which existing four levels of demand, each one
being able to bring a profit Pi (i=1..4)
Project
investment of:
Capacity q1
Capacity q2
Capacity q3
Capacity q4
Product 1
P1
200
180
10
80
Product 2
P2
180
270
210
100
Product 3
P3
160
250
400
300
Product 4
P4
150
200
380
450
Table 9.1 The investment project selection using Bayes Laplace criteria.
We suppose that the probability of demand for each type of product is 50%.
The Net Present Value (NPV) for each project investment in production capacities
will be obtained by multiplying the probability coefficient (in our case 50% or 0,5)
with the product capacity for each product. In this way well have:
q1 P1= (0,5 x 200) + (0,5 x 180) + (0,5 x 160) + (0,5 x 150) = 345
q2 P2= (0,5 x 180) + (0,5 x 270) + (0,5 x 250) + (0,5 x 200) = 450
q3 P3= (0,5 x 10) + (0,5 x 210) + (0,5 x 100) + (0,5 x 180) = 250
q4 P4= (0,5 x 80) + (0,5 x 100) + (0,5 x 300) + (0,5 x 450) = 415
According to the Bayes-Laplace criteria, the project investment no. 2 will obtain
the highest profit, so the variant 2 seemes to be the most advantageous.
The Maximin criteria (maxim gain at minimum risk) starts with the pessimistic
assumption that the investor will choose to have a minimum sure gain instead a big
one, but uncertain. Therefore, the investor will choose those projects that brings a
maximum sure income at a minimum production capacity.
From table 9.2, will result that product 1 will fulfill the restrictive condition by the
maximin criteria and the product capacity q2.
Project investment in plant
capacity
q1
q2
q3
q4
Minimum risk in demand for product and

maximum profit
150
180
10
80
Table 9.2 The selection of project investment variant using minimax criteria
Maximax criteria is the opposite of maximin criteria. It is based on the assumption

that the investor is optimist and will choose the variant of investment project which
brings maximum profit at maximum risk. From the table 9.3 will result:
Project investment in plant capacity
q1
q2
q3
q4
Maximum risk in demand for product and

maximum profit
200
270
400
450
Table 9.3 The selection of project investments variant using maximax criteria
Analyzing the data from table 9.3 will result that the variant q4 will be the best.
Hurwicz criteria
The investment project selection using Hurwicz minimax criteria is based on the
relationship between maximin criteria and minimax criteria based on the
assumption that the investor is not either optimistic or pessimistic.
This criteria use the score methods from the best or worse variants of investment
projects.
The score method is to give certain scores (usually from 0 to 1) to variants of
investment projects, function of investors attitude. For example, if the investor
choose investments with minimum risk (has risk aversion) is considered a prudent
investor. In this case, the investor will use a higher score (c= 0,75-0,85) for variants
of investment projects that brings a minimum certain profit and the rest for variants
of investment projects with maximum uncertain profit.
Applying the Hurwicz criteria to the selection of the four types of investment
projects, well chooses those variants of projects which brings maximum profit
both in maximum risk conditions for which c=0,25-0,35 or minimum risk
conditions for which c=0,65-0,75.
Project
investment
in plant
capacity
Maximum
profit
Score
(risk
25%)
1
q1
q2
q3
q4
2
200
270
400
450
3
0,25
0,25
0,25
0,25
Maximum
profit
at
maximum
risk
(2x3)
4
50
65
100
112,5
Minimum
Profit
Score
(risk
75%)
Minimum
profit at
minimum
risk
(5x6)
Profit at
optimum
risk
(4+7)
5
150
180
10
80
6
0,75
0,75
0,75
0,75
7
112,5
135
7,5
60
8
162,5
200
100,5
172,5
Table 9.4 The selection of variants of project investment using Hurwicz criteria
The advantage of this method comparing to the previous methods is based on the
fact that the structure of business (production) is taking into consideration at the
selection for the best variant of investment project.
Regretes minimax criteria
Is the method which take into consideration the losses from costs based on
deficient decisions. It is assumed that the investor will have regrets in choosing a
variant of project considered to be disadvantageous. The regret or the cost of
opportunity of incorect decision is given by the difference between the present
profit and the maximum profit which should have been obtained for the
corespondent level of demand. For this, the matrix of regrets is establishing
following the methodology presented below:
Step 1. The maximum forecasted profit is taken for each product. For example, for
product 1, maximum profit is 200 at project investment q1 (see table 9.5)
Step 2. For the same product, the maximum profit is compared with the variants of
investment projects for production capacities taking into account that, from
the maximum value of profit/product or profit/product range are extracted
the profit forecasted values as in the next example:
200-200=0
200-180=20
200-10= 190
200-80 =120
The same for other products
Step 3. The matrix of regrets is filling up:
Project
investment in
plant capacity
q1
q2
q3
q4
Product 1
P1
Product 2
P2
Product 3
P3
Product 4
P4
0
20
190
120
90
0
60
170
240
150
0
100
300
250
70
0
Table 9.5 The matrix of minimax regretes for selection of variants projects of
investments
Step 4. The maximum regret will be obtained for each capacity of production.
Project investment in plant capacity
q1
q2
q3
q4
Maximum
regret
300
250
190
170
Table 9.6 The selection of investments projects based on matrix of regrets
Step 5 and conclusions: Analysing the data from table 9.6 will result that the
variant 4 is the best as the project investment maximum
regret is optimum for minimum profit (the project
investment in plant capacity q4).
9.3 Sensitivity analysis
This type of analysis, as the name shows, establishes the level of sensitivity of a
future investment project to random modifications that could appear during the
project life cycle.
The sensitivity analysis consists in making estimations of the costs modifications
for investment projects, due to negative influences considered as critical variables
as inflation, interest rates changes, currency ratio modifications etc. and finding of
the minimum influence point in costs. The principal analytic indicators are
Financial Internal Rate of Return (FIRR), Discounted Cash Flow (DCF), Project
Time for Completing, Net Present Value (NPV), Forecasted Selling Price (FPS),
Annual Turnover (AT), Breakeven Point (BP).
9.4 Forecasting methods for investment projects
The economic forecasting represents the process of anticipation of economic
processes in the future taking into account historic data.
The main methods in economic forecasting are:
comparation method,
extrapolation method (the future projection of economic process function of
its previous evolution),
reflexive method by using some coefficients which characterize the trend in
evolution of the investigated case,
normative method by establishing of resource consumption normes;
explorative method based on mathematical functions as Cobb-Douglas
production function, based on the existence of some dependent variables and
one or more independent variables.
The economic forecasting of project investment starts from marketing analyses

concerning the balance supply and offer on the market for certain products and
services. The forecasting analysis could be a valuable support opportunity,
prefeasibility, feasibility studies and business plans or any time when a business
development or investments are required.
In the case of forecasting for investment projects for production activities, there are
taking into consideration the next items:
- the demand for products;
- the production that will be made and for which the Cobb-Douglas function is
used; for example if we have to find the forecasted production using
Cobb-Douglas function well apply the formula:
Q = g LK in which Q = production, L = labour; K = invested capital g = growth
coefficient; = elasticity coeficient of productivity to labour skills;
= elasticity coefficient of productivity to capital invested;
and of Domar model =
Q
in which Q = production modification on market
I
demand and I=investments.

- project investment indicators (mentioned in previous courses);
- the needed capital for investment from own or borrowed sources.
When making a forecasting analysis, several methodological steps are performed:
- Step 1: The establishing of the indicators that will be forecasted, of dependent
variable y and of independent variables x1, x2,..., xn;
- Step 2: The documentation and analysis of statistic data concerning the time
evolution of dependent and independent variables;
- Step 3: The establishing of production functions which relate the evolution
dependent variables reported to independent variables;
- Step 4: The finding of mathematical functions coefficients for forecasting using
the less square method the sum of differential squares between
calculated values (yi) and medium statistic values (Yi) to be minimize as
n
S = ( y i Yi ) 2 = min im
(9.1)
t =1
As it is well known, the minimum of a function is given by the roots of the first
derivative that comply with the conditions:
S
S
S
= 0;
= 0; ...;
=0
a 1
a n
a 0
(9.2)
- Step 5: The writing down of the mathematical form of the forecasting function;
- Step 6: The calculation of the dependent variable based on the considered function
and the testing of the forecasted mathematical function; The calculus of
statistical indicators;
- Step 7: The forecasting of dependent variable based on elected function and the
required capital for investment with the production function established
earlier.
Economic forecasting functions
The mathematical functions for economic forecasting contain four categories:
- polynomial and power functions that are used when the dependent and
independent variable have variable evolutions;
The mathematical representation is:
n
y = at x t
(9.3)
t=0
and graphically represented by a line:
y = a 0 + a1 x
y = a 0 + a1 x + a 2 x 2
parabola (slope)
(9.4)
(9.5)
y = ax
(9.6)
power function
in which y = dependent variable, x = independent variable, at = proportion
coefficients
- exponential functions that are used in the case when the dependent variable has
fast growing comparing to independent variables:
y = ab x
(9.7)
b
y = a + bx
or
(9.8)
- logarithmic functions that are used in the moment when the evolution of analysed
investments is fast growing or fast decreasing:
y = a log b x
(9.9)
or
y = a + b log e x
(9.10)
- logistical and homographic functions are used at the project investments that have
as main objective reaching to the top or lowest levels and have contradictory
evolutions (fast ascending and fast descending). This functions have the
following mathematical representations:
y=
ax + b
k
b
; y=
; y=a+
bx
cx + d
c+x
1 + ae
(9.11)
9.5 Conclusions
In any investment project, risk and uncertainty are inevitable. Therefore, proper
risk and uncertainty analyses are necessary. In these types of analyses, we assess
the risk level following five classes of risk (very low, low, medium, high and very
high). Some economic criterias are used in risk assessment such as: BayesLaplace, Maximum, Maximax, Horwicz and regrets minimax.
To show the capacity of the investment project to face random modifications,
sensitivity analyses are required, in which indicators such as FIRR, DCF, NPV,
FSPAT, BP are used.
The main forecasting methods are: comparation, extrapolation, reflexive,
normative, explorative.
9.6 Themes for students
- Define risk and uncertainty.
- Observe and analyse the risk and uncertainty to an investment project in an
environmental field.
- Build a DCF for a company with 120.000 annual turnover.
Chapter 10
Instruments to assist decision

for sustainable companies
Introduction
The CSB graph
Computer Expert System for CSB
Conclusions
Bibliography
10.1 Introductions
The growing awareness and the need to reduce the environmental impact of
products, processes and activities in the building industry, found in LCA (Life
Cycle Assessment) one important managerial tool in assisting the strategic
planning and decision making. LCA is considered to be a support tool to
implement Environmental Management System (EMS) and Life Cycle Thinking
(LCT) in the companies. This trend is also in the building industry.
The success of LCA implementation in the (building) companies depends on how
the information regarding four important factors as economical, technical,
environmental, human-social are received and understand by the top management.
If the way of presenting the data is concise, time-efficient and interrelate the four
factors, the work efficiency of the building company management is improving and
the time from decisions till practical application is shortened.
10.2 The CSB graph
The new information technologies e.g. computers and specialized programs used
by the building companies, allows the fast synthesis and the aggregation of
different various data covering the four factors (economical, technical,
environmental, human-social) which usually the top management are using into
decision making processes.
Therefore, it is a need for an instrument capable to aggregate data from the four
factors and to relate these data to product life cycle at the level of the stage for
which the building company is specialized. CSB graph is presented in the fig. 10.1:
Instruments to assist decision for sustainable companies
EV 1
EV 2
HIGH
LEVEL
EI 10
EI 9 EI 8
EI 7
EV 3
ECONOMIC
VALUATION
EI 6 ENVIRONMENTAL
IMPACT
EI 5
EV 4
EV 5
EI 4
EI 3
EV 6
EI 2
EV 7
EI 1
TV 1
IH 6
IH 5
TV 2
TECHNICAL
VALUATION
TV 3
IH 4
TV 4
TV 5
IH 3
IH 2
TV 6
BEST
PRACTICE
FIRM
EI 1
EI 2
EI 3
EI 4
EI 5
EI 6
EI 7
EI 8
EI 9
EI10
EV 1
EV 2
EV 3
EV 4
EV 5
ENVIRONMENTAL IMPACT
RESOURCE DEPLETION
Depletion of non-renewable resources
Depletion of renewable resources
Land use
POLLUTION
Global warming
Ozone depletion
Photochemical oxidant formation
Acidification
Eutrophication
Waste
Ecotoxicity
ECONOMIC VALUATION
Product value
Product / Project cost
Product / Project benefit
Depreciation
Profit
TV 7
EV 6
EV 7
TV 1
TV 2
TV 3
TV 4
TV 5
TV 6
TV 7
IH 1
IH 2
IH 3
IH 4
IH 5
IH 6
MEDIUM
LEVEL
IMPACT ON
HUMAN
(INDIVIDUALS
AND
SOCIETY)
IH 1
LOW
LEVEL
Value added
Material Stocks level
TECHNICAL VALUATION
Productivity
Efficiency
Effectiveness
Quality
Flexibility (Rate of change)
Energy consumption
Complexity degree
IMPACT ON HUMAN
Health
Social
Cultural
Political ( Legislation e.g. Eco-Tax)
Customer satisfaction
Empowerment and innovation
Figure 10.1 The CSB (Circular Synergic Benchmark)1 graph adapted after Balm
(1992)
1
CSB graph was developed by Cristian Silviu Banacu in 1996 at Chalmers University of Technology
under the supervision of professor dr. Sten Bengtsson
This instrument puts in one sight view information obtained from different
departments within the building companies: management, human resources,
marketing, technology, environment, production, legal, accounting, purchasing,
business development, distribution, communication.
It is considered that a eco-product must be:
Economically profitable,
Environmental friendly,
Technologically feasible,
Socially acceptable.
Therefore, the CSB graph has four quadrants correspondent to the four aspects that
concern a building company in relation with the product life cycle. These are:
1. Economic: the reason of being of any company is to obtain profit, to minimize
the production costs, to have a better public image, to straighten its position on
the market. Costs, profits, depreciation of machinery are factors that influence
the decision making of the building companies. Putting into a single chart these
factors together with the environmental impact of the product at different stages
of its life cycle and considering the technical and social aspects of production,
the building company management will have a complete image of the feasibility
of the product.
2. Environmental: reflects the need of the company to adapt its production to the
new environmental requirements. The environmental data for PLCC are
obtained from LCA of the product. However, a formal modification will be
made in the sense that the LCA data will concern the stage of the product life
cycle, according to the building companys profile. For example, if the field of
activity of the building company are the building works, reparations for
buildings or building property management (real estate management), LCA that
will be made, will be specific to this segment of the building life cycle. That
means that the stage product in use will be analysed separately of the whole
life cycle, but following the LCA procedures (goal definitions, inventory,
impact assessment, improvement assessment).
The analyses concern more indoor climate, energy consumption over the
building usage, waste separation at source, CO emissions during construction
works etc.)
3. Technical: reflects the need of the building companies to improve its efficiency
and productivity in order to minimize the energy consumption together with the
emissions of wastes and noxious; to improve the quality of products through
quality of activities and processes; to let room for innovation.
4. Social human needs: reflects the interest of the building company into
motivating its employees for an environmental behaviour. The Learning
organization is transforming into an environmental educational organization;
Employees learn to have an environmental behaviour either by qualification
courses for environment performed by the company or by the nature of job e.g.
selective demolition, materials and building component parts recovery-recyclereuse. The social aspect of environmental qualification resides on the fact that
the employees will continue to have an environmental attitude also in their
private life, which is good for entire society. Other aspects are related to the
policy of the building companies to create jobs especially in new segments as
recycling, re-manufacturing of materials and products resulted from demolition.
The CSB has axes in each quadrant. The number of axes depends on the number of
issues that the building company management wants to have information about.
The chart has three levels:
minimum (low),
medium,
high.
The chart is aiming to present the trend (resulted from analysis) for a specific
aspect of the product during its life cycle, and not to give numerical data.
Therefore, it was understood that the results obtained are from different numeric
analyses (economical, technical, environmental, social). However, it must exists
the possibility that the data were easy verifiable. Therefore, the building company
could provide a system of measures as is presented in the table 10.1.
The CSB graph is characteristic to the type of Management through objectives and
therefore, a Best Practice Company is considered to be as a system of reference.
The Best Practice Company is the company which is the most experienced in the
field, obtaining maximum profit and having a good technological development, but
in the same time, is having good results concerning Environmental issues (energy
consumption, pollution, depletion minimising).
If there is not other competitor, with better results, the building company could
consider its own goals as a level of reference.
For different products with the same characteristics, it is possible that if we use a
proper weighing, we find the best alternative.
An example of weighing is given in the table 10.2:

ENVIRONMENTAL IMPACT
RESOURCE DEPLETION
EI 1
EI 4
Depletion of non-renewable
resources
Depletion of renewable resources
Land use
POLLUTION
Global warming
EI 5
Ozone depletion
EI 6
EI 7
EI 8
EI 9
Photochemical oxidant formation

Acidification
Eutrophication
Waste
EI10
EV 1
EV 2
EV 3
EV 4
Ecotoxicity
ECONOMIC VALUATION
Product value
Product / Project cost
Product / Project Company benefit
Depreciation
EV 5
EV 6
EV 7
Profit
Value added
Material Stocks level
TV 1
TV 2
TV 3
TV 4
TECHNICAL VALUATION
Productivity
Efficiency
Effectiveness
Quality
TV 5
TV 6

Energy consumption
TV 7
Complexity degree
IMPACT ON HUMAN
Health
Social
Cultural
Political ( Legislation e.g. Eco-Tax)
Customer satisfaction
Empowerment and innovation
EI 2
EI 3
IH 1
IH 2
IH 3
IH 4
IH 5
IH 6
MATERIALS;
EMMISIONS
MEASURES
kg. Metter or MJ energy from fossil fuels
MJ energy from hydropower
km2 crop land or km2 forest
CO2, CO
SO2, Nox, HCl

Nox, NH3, P
Global Warming Potential (GWP), CO2

equivalent
ozone depletion potential, (CFC 11)
equivalent
ethene equivalent
H+ equivalent
PO42- equivalent
Mass Units (M) e.g. kg waste and kg
hazardous waste
No Effect Levels (NOELS)
Monetary Units (MU)
Monetary Units (MU)
Monetary Units (MU)
Monetary Units (MU), Time Units (TU),
Physical Units (PU)
Monetary Units
Monetary Units
Quantity, Volume, Mass measures (tonnes,
m3.no.)
Functional Units (FU) / Time Units (TU)
Input / Output
Available Time / Effective Time
Max(Usage Time) / Min (Time for
Maintanance)
Life time product 1 / Life time product 2
MJ / product, process
percentage
No. of people possible affected / FU product
No. of jobs winned / lost
Eco-Tax level
No. of product sold / year
Rate of innovation
Table 10.1 System of measures for CSB graph (Circular Synergic Benchmark
concepted by C.S. Bnacu)
N.B. The presented weighing model is purely illustrative. A proper weighing

system have to be established by specialists, according to each category of
importance for the building company and for society.
ENVIRONMENTAL IMPACT Weight
Scale (percentage)
Low Level Medium Level High Level
RESOURCE DEPLETION
Depletion of non-renewable
resources
EI 2 Depletion of renewable resources
EI 3 Land use
POLLUTION
EI 4 Global warming
EI 5 Ozone depletion
EI 6 Photochemical oxidant formation
EI 7 Acidification
EI 8 Eutrophication
EI 9 Waste
EI10 Ecotoxicity
ECONOMIC VALUATION
EI 1
0.15
0.5
0
50
100
1= small 50 = medium 100 = large
0.5
0.5
0.25
0.10
0.5
0.05
0.020
0.020
0.05
0.05

1= small
1= small
1= small
1= small
1= small
1= small
1= small
Scale
50 = medium
50 = medium
50 = medium
50 = medium
50 = medium
50 = medium
50 = medium
100 = large
100 = large
100 = large
100 = large
100 = large
100 = large
100 = large
EV 1 Product value
EV 2 Product / Project cost
EV 3 Product / Project Company
benefit
EV 4 Depreciation of machinery
EV 5 Profit
EV 6 Value added
EV 7 Material Stocks level
TECHNICAL ASSESSMENT
0.10
0.10
0.10
1 = poor 50 = good 100 = excellent

0.10
0.25
0.15
0.20
1= slow 50 = medium 100 = fast

1 = poor 50 = good
100=excellent
1 = poor 50 = good
!00=excellent
Scale
TV 1
TV 2
TV 3
TV 4
TV 5
TV 6
TV 7
Productivity
0.10
1 = poor 50 = good
100=excellent
Efficiency
0.45
1 = poor 50 = good
100=excellent
Effectiveness
0.10
1 = poor 50 = good
100=excellent
Quality
0.25
1 = poor 50 = good
100=excellent
0.05
1 = poor 50 = good
100=excellent
Energy consumption
0.10
Complexity degree
0.05
IMPACT ON HUMAN
IH 1 Health
0.45
IH 2 Social
0.10
IH 3 Cultural
0.5
IH 4 Political (Legislation e.g.
0.25
Eco-Tax)
IH 5 Customer satisfaction
0.10
1 = poor 50 = good 100 = excellent
IH 6 Empowerment and innovation
0.10
Table 10.2 A model of weighing system for CSB graph
Method of calculation:
The method of calculation is similar when comparing the results of two
companies that make a product with the same characteristics, or when comparing
two or more products, projects or processes alternatives that the company has to
decide about.
Positional value = weight x scale (%)
(10.1)
It is considered that the scale of the homologue axe from the CSB is from 1 to 10.
For example: Depletion of non-renewable resource for a certain material:
Company A: 0.5 x 50 = 2.5
Company B: 0.5 x 49 = 2.45
The analysis follows for all the items presented in the CSB weighing table.
The comparative results are presented in the CSB.
10.3 Computer Expert System for CSB
CSB can increase in utility by developing a computer program (fig.10.2).
In this way, the information from different data bases of the company concerning
product, processes/activities and projects can be easily aggregated in one-sight
chart.
The information could be easily updated according to the modifications that can
occur at one period of time in relation with the product, project, process/activity,
from different aspects: economical, technical, environmental, social.
In this way, the Top Management of a building company can analyse just in time
the best alternative of products, project investments, or to choose the suitable
technologies for its production purposes.
Data from the producers of various building components, materials and machinery
will be available for the building companies. By simply actualising the data bases
of the company, the management of the building company can quickly establish the
best decisions to be taken regarding suppliers, qualification of personnel, investing
in new technologies.
Increase profit
Decrase impact
impact
Decrease
Economic Data
Accounting Dept..
Profit from recovery, recycling reusing, Eco-tax reduction
Environmental impact
data: Source LCA
BUILDING COMPANY
MANAGEMENT
Reduction
of costs by
efficient
using of
machinery
PLCC
Technical Data
Process, activity
environmental
atttude of the
attitude
employees,
innovation
Social data
empowerment and motivation for quality work
increase work efficiency stimulate innovation
Increase efficiency
Increase participation,
motivation
Informations from data bases

Management decisions
Figure 10.2 Computerized variant of CSB expert system for sustainable companies
10.4 Conclusions
The actual practice of implementing the Life Cycle Assessment (LCA) for
products, processes and activities in the companies from the building industry
made necessary the development of specific tools that could ease the tasks of the
Top Management.
One such tool is the Circular Synergic Benchmark (CSB), which puts together the
four categories of requirements for the products: economic profitability,
environmental friendly, technical effective, social acceptance.
CSB has the following advantages:
is easy readable and understandable,
offers in a comprehensive form data from four issues by which a company is

interested in a product: economical, environmental, technical-technological,
human-social,
increase the efficiency in work of management,
if used on a computer program, it could transform itself into a barometer of
the company concerning its policy for a certain product,
allows the comparisions between companies with the same domain of activity,
allows the comparisions between products with the same functionality,
is an instrument also useful in Eco-Labelling of the products.
10.5 Bibliography
1. Balm, J. B.
Benchmarking: a Practitioners Guide for becoming and

staying Best of the Best, Illinois, QPMA Press 1992
2. Gheorghiu, A.
Analiza economico-financiar a ntreprinderilor. Note de

curs, 1993.
3. Keoleian, G.,
Menerey, D.
Product Life Cycle Assessment to reduce health risks and

environmental impacts.
4. Tillman, A. M., General description of Life Cycle Assessment Methodology,

Baumann H.
Rapport 1995:5 Chalmers University of Technology,
Gteborg Sweden
5. Thuesen, G. J., Engineering Economy, New Jersey, Practice Hall, USA.,
Fabrycky, W. J. 1994
6. ***
LCA-NORDIC Technical reports no. 1-9
7. ***
SETAC Guidelines for Life Cycle Assessment, A code of

practice, 1993
Chapter 11
Investments in research
and development (R&D) projects
The importance of investments in research and development projects

Indicators for feasibility analyses in research and development activities
11.1 The importance of investments in research and development projects

The R&D projects are the engine which drives innovation and makes possible
technical advance. Unfortunetelly as weve mentioned in the Chapter 9 when
talking about the risk, weve noticed that the higher investment risk was associated
with R&D and innovation. But without R&D and innovation is impossible to make
new products and to find sollutions at nowadays problems as pollution or high
energy consumption. Therefore we must find ways by which investments to be
oriented to the activities of R&D. A way is to find proper measures to quantify the
efforts and effects of R&D activities.
11.2 Indicators for feasibility analyses in research and development activities
The financial return of new products
J.W. Tipping, E. Zeffren and A.R. Fusfeld (1995) propose in an article called
Assessing the value of technology measures to determine the value of investment in
R&D. In the this chapter well present the measures proposed by the up-mentioned
authors.
The measures for determining the value of the investment in R&D requires a
system for identifying and tracking over time the cost and commercial outcomes of
R&D activities, by programs or by individual projects as well as on a total basis. In
this category, some basic measures are needed to determine the value-creation
benefits of R&D. There are:
1. New Sales Ratio (NSR),
2. Cost Savings Ratio (CSR),
3. R&D Yeld,
4. R&D Return.
1. R&D Intensity (RI)

a) New Sales Ratio (NSR): The ratio of sales revenue in year i from product
developments commercialized in years i-j to i-l to total sales revenue in year i,
or
NSR =
1 N =i l
NPsales
SR rev N =i j
(11.1)
where:
NPsales = sales revenue in year i from product developments commercialized in
year N;
Sales
= total sales revenue in year i.
b) Cost Savings Ratio (CSR): The ratio of savings in the cost of goods sold in year
i from process development or product changes adopted in years i-k to i-l to
average gross profits in year i, or:
CSR =
1 N =i l
CG savings
GP N =i k
(11.2)
where:
CGsavings = reduction in cost of goods sold in year i from process developments
or product changes adopted in year N:
GP
= average gross profit for business unit in year i.
c) R&D Yield: The gross profit (GP) contribution from the sale of new and
improved products (NP) and from the lower cost of goods from new and
improved processes or new formulations (CR).
where:
or
R & D Yield = NP + CR
(11.3)
NP = GP NSR
CR = GP CSR
(11.4)
(11.5)
R & D Yield = GP( NSR + CSR )
(11.6)
d) R&D Return: The ratio of R&D benefits to R&D investment.
R & D Re turn =
R & D Yield
R & D Effort
GP
(NSR + CSR )
Sales
=
RI
(11.7)
Investments in research and development (R&D) projects for sustainable

development
where:
R & D Effort = Annual expenditure on R&D,
and
RI = R & D Intensity =
R & D Effort
Sales
(11.8)
Most other useful financial measures can be derived from these four basic
measures. NSR is essentially the fraction of sales derived from new products, with
the time frame being chosen as appropiate for the company and/or industry.
Since technical effort is usually the source of cost savings from process
developments and for formula modifications, CSR is an attempt to capture that in a
reliable manner.
The Gross Profit Margin used in CSR represents the revenues minus cost of goods
sold, including product cost and direct manufacturing cost.
Later those costs can be reduced by technology development effort, and to the
extent they are contributions from R&D.
The time frame is important for proper use of these measures.
When i = current year or earlier, the measures are retrospective; when i = next year
or later, the measures are prospective. In these definitions, j and k are constants
which reflect the strategic emphasis and/or industry characteristics of the business
enterprise.
To utilize these measures, appropriate values must be selected for j and k and
operational definitions must be established for product development, process
development and R&D expenditures.
This should be straightforward in most firms.
2. Projected value of the R&D/Value Creation (VC), Portofolio Assessment
(PA)
a) Projected Sales Value
Fraction of future sales by year projected from projects in the R&D,
incorporating probability of attaining objective for each project.
b) Projected Income Value
Fraction of future net income (and/r return) by year projected from projects in
the R&D pipeline, incorporating NPV times probability of attaining objective
for each project.
3. Comparative manufacturing cost/Value Creation (VC), Asset Value of

Technology (AVT)
Benchmarked manufacturing cost data vs. competition for substantially
identical manufacturing steps or for producing substantially the same product
(eliminating factors unrelated to technology-based differences).
While most firms have accurate data on their own manufacturing costs, the
generation of accurate manufacturing cost data for the competition is considerably
more difficult. Therefore, when using this measurement, the firmness of the
estimate competitive manufacturing cost should be identified.
4. Product quality and reliability/Value Creation (VC), Asset Value of
Technology (AVT)
a) Customer or Consumer Evaluation
Relative quality (as evaluated by the customer/consumer) vs. competitive
product in blinded product evaluation by techniques appropiate to the industry
segment.
b) Reliability/Defect Rate Assessment
At the firm level, fraction of company's product output that meets or exceeds
the established quality standards. At the product level, fraction of a given
product's quarterly output that meets or exceeds the established quality
standards.
The two measures provided here are best used together. Each firm will generally
have a preferred technique for evaluating with customers or consumers how well
their products perform versus competition.
5. Gross profit margin/Value Creation (VC), Asset Value of Technology
(AVT)
` Gross Profit as a percentage of sales, where gross profit equals net sales minus
cost of goods sold (product costs plus direct manufacturing costs). Value
assesment should be based on change in gross profit margin from period to
period. (Periods should be appropriate to an industry and may be in excess of
one year).
Gross profit margin is used in assessing the value of the technology assets of the
firm and R&D 's contribution to value creation, since beyond direct manufacturing
costs and costs of goods sold, other activities of the firm have significant influences
on profit margin.

development
6. Market share/Value Creation (VC), Asset Value of Technology (AVT)

a) Direct Market Share
Company (or business unit) market share in various categories measured as
appropiate for the industry or category. As with gross profit margin, changes
should be assessed at least annually to determine rate of progress or decline.
b) Related Market Share
Share data in related markets for indication of threats or opportunities.
Market share determinations need to be approached cautiously. While product
advances should have a beneficial impact on market share and can be
representative of value creation for the firm, there can be many confounding
factors in a market share determination.
These would include such things as the size and quality of the marketing effort, the
competitive response, the relative state of the economy etc.
One should also be sensitive to share data in related markets (e.g. housing market
related to construction machinery market, control equipment for construction
market, housholding appliances market etc.), since market transformation is often
created by unexpected competitors.
7. Strategic alignment/Portfolio Assessment (PA), Integration With Business
(IWB), Asset Value of Technology (AVT)
a) Corporate and Business Unit
Fraction of total R&D portfolio which is consistent with corporate goals and,
where applicable, for each major business unit. Should also include specific
identification of the company or business goal which identified a project.
b) Goal Coverage
Fraction of corporate or business unit goals requiring technology development
that are addressed by the R&D portfolio.
While it seems unlikely that much, if any, of the R&D portfolio would not be
consistent with corporate goals, this question needs to be explicitly addressed. If
the number of projects not consistent with corporate or business unit goals is
substantial, explanations need to be given. For goal coverage, serious questions
must be asked if major business goals are not addressed by the R&D portfolio. In
particular, either the total size of the R&D effort or its distribution must be
questioned.
8. Distribution of technology investment/Portfolio Assessment (PA), Asset
Value of Technology (AVT)
Analysis of the fraction of the total R&D investment along various dimensions.
Each company should describe its portfolio of technical activities along dimensions
that are important to decision making and communication between stakeholders.
Some of the more common dimensions are:
A. Dimensions potentially of greater interest to the Cost Estimated of Outcome
(CEO) and to business management:
Categorization of reward vs. risk,
By product line or business unit,
For maintenance of current business, expansion of current business or
creation of new business,
Environmentally driven vs. non-environmental,
Distribution according to time of commercialization.
B. Dimensions potentially of greater interest to business management (and some of
CEOs):
For cost reduction, applications development or performance differentation,
For technical service, basic research, applied research, product development
and process development,
For current markets, markets new to the company or markets new to the
world,
For current technology, technology new to the company or technology new
to the world.
C. Dimensions potentially of greater interest to R&D management:
Distribution by project stage,
Distribution by technical discipline,
External R&D vs. Internal,
Base, key or pacing technology,
Core vs. new competencies.
This measurement area provides much texture for the analysis of how well a firm's
R&D program is protecting the technology investment and technical position of the
company. Important output from assessment of technology investment distribution
are the questions that the analysis causes to be asked regarding what distribution is
desired. This helps set the direction for modifying the R&D portfolio.

development
9. Number of ways technology is exploited/Portfolio Assessment (PA), Asset

value of technology (AVT)
Assessment of the number of different product types or business segments utilizing
or planning to utilize a given technical asset (the exploitation of functional
competencies).
Measurements in this area cause a firm to stretch the limits of application of its
technology. By conscious examination of this, market opportunities beyond one's
current markets can be created. While such opportunities may or may not be
pursued, this examination allows R&D to maximize the possible output from its
creative endeavors.
10. Number of project definitions having business/marketing approval/
Integration With Business (IWB)
Fraction (or percent) of projects in the total R&D portfolio with explicit business
unit and/or corporate business management sign-off.
Ideally, all projects except "skunk works projects" would have either corporate or
business unit sign-off. In practice, exploratory feasibility determination work is
likely not to; such work would be expected, however, to be aimed at areas of
known interest.
11. Use of project milestone system/Practice of R&D Process to Support
Innovation (PRD), Integration With Business (IWB)
Fractions of projects in the total portfolio going through a defined project
management system with defined milestones.
The ideal value for this measurement must be determined by each firm for itself, as
it will depend on a number of aspects of the Distribution of the Technology
Investment (measure 8). Firms with a larger percentage of exploratory projects
would be expected to have a lower fraction going through a defined project
management system. Once feasibility has been demonstrated, most firms would
have a fairly high percentage of their projects going through a defined system.
12. Percent funding by the business/Integration With Business (IWB)
Fraction (or percent) of the R&D budget from business unit sources.
This measurement has most utility for corporate labs or for centralized R&D
organizations. Again, the ideal value for this measurement will depend on the
individual firm's circumstances. The number will also depend on the strategic
intent of the firm; if R&D is being asked to break ground in a new business area for
which no revenues currently exist, one would expect the fraction of the R&D
budget from business unit sources to be lower.
13. Technology transfer to manufacturing/Integration With Business (IWB),

Practice of R&D Process to Support Innovation (PRD)
Semi-quantitative assessment (e.g., an interval scale from 1 to 5) of the
effectiveness of the transfer with ratings obtained from both R&D and
manufacturing sides of the interface.
This measurement is important for its reflection on the closeness of the working
relationship between R&D and manufacturing. As with several other measures
described later, the suggested measurement technique involves an interval scale,
with ratings from 1 to 5. Such a scale must be carefully created with proper
anchoring descriptions for the ends of the scale, and for the middle.
14. Use of cross-functional teams/Integration With Business (IWB), Practice of
R&D Process to support Innovation (PRD)
Fraction of projects in the R&D portfolio with specific cross-functional teams
assigned.
This analysis can be further subdivided by project types; e.g., short-term
development, long-term development, applied research etc.
Current assessment of best practices of technology management includes the use of
cross-functional teams to ensure alignment of research with the other functions and
with the business strategy. Research has shown it to be one of the more useful
leading indicators for financial success and R&D output. Metrics should evaluate
not only the number of teams but also their composition and role. Internal trend
analysis is more important than absolute benchmarking against competitors.
15. Rating of product technology benefits/Asset value of Technology (AVT),
Value Creation (VC)
a. Customer Rating
Numerical ranking of a firm's product by a given customer divided by that
customer's ranking of the best competitive product.
This ratio can be averaged across customers and/or market segments using the
product to obtain an average ratio value.
b. Economic evaluation
Price differencial per unit obtained by virtue of quality feature(s) derived from
technical effort minus the cost per unit of providing the feature(s) times unit
sales volume for products containing the feature(s).

development
c. Market Share Evaluation

Differential share gain(s) at a constant price for product(s) containing the
quality feature(s).
Ideally, this metric will measure the customers' perceptions of how each competitor
delivers value.
A customer survey should be used to determine how the products from each
competitor rank on a numerical scale in delivering benefits. To handle the
individual options, a ratio should be made of the firm's numerical rating to the
competitor.
The ratios can be averaged across many customers and different market segments
to obtain an average ratio value.
The Economic Evaluation measure provides an estimate of the commercial value
of a technology benefit in the firm's products, based on the proposition that the
benefit allows a premium price relative to the competition.
The Market Share evaluation assumes that competitive pressures may prevent the
firm from gaining a price premium for the technology benefit, but for the benefit to
be worth the cost in this situation, market share gains should provide the economic
gain that is desired.
16. Response time to competitive moves/Asset Value of Technology (AVT),
Practice of R&D Process to support Innovation (PRD)
Time required for the firm to match competitors' newest product benefit(s)
divided by time required for competitor to match firm's newest product
benefit(s).
This metric relates to the ability of the firm to either maintain a leadership position
or to match technology moves by the competition. It is a part of Customer
Satisfaction.
17. Current investment in technology/Asset Value of Technology (AVT)
Current annual expenditures for R&D staff and equipment rationed to best
competitor, to industry average and to industry total.
This metric measures the rate of current activity in developing the technology of
interest with the intent of predicting whether the firm is expected to gain or lose
ground in the technology. It should be kept separately for the key and pacing
technologies most critical to the strategy. It is best used as a ratio of investment by

the firm compared to the best competitor. Ideally, quality of the research staff
should also be factored into the metric, since output of the investment will be
determined not only by the effort but by the abilities of the researchers.
18. Quality of personnel/Asset Value of Technology (AVT), Practice of R&D
Process to support Innovation (PRD)
Several measures are possible; the ones chosen should be appropriate for the firm's
technology development strategy.
a. Internal Customer Rating
Interval rating scale (e.g., a scale from 1 to 5) from R&D's internal customers, such
as marketing, manufacturing etc.
b. External Customer Rating
Interval rating scale from the firm's major customers.
c. External Recognition
External awards and invited lectures by the professional staff over a relevant time
period.
d. Published Works
Publications and patents by the professional staff over a relevant time period.
Research has shown this metric to be a leading indicator for many intermediate
factors, but only a weak leading indicator of new products. Quality of personnel
relative to the competitors is a difficult metric to evaluate in most cases. In some
cases, it is clear that one competitor considers one challenging area more strategic
that another competitor and consequently puts the best resources there.
In using this metric it is important to decide whether one is addressing the quality
in a specific arena or the general overall quality of the research group.

development
19. Development cycle time/Asset Value of Technology (AVT), Practice of

a. Market Cycle Time
Elapsed time from identification of a customer product need until commercial sales
commence.
b. Project Management Cycle Time
Elapsed time from establishment of a discrete project to address an identified
customer product need until commercial sales commence.
For both (a) and (b) the end point can be the time when manufacturing feasibility is
established for those cases where no commercialization occurs.
Compare to historical values and benchmark vs. competition if possible. Group by
categories of projects (e.g. major new product, minor product variation etc.). Can
also be used to track milestone attainment rate for firms using a stage gate
management process.
The literature suggests that short cycle time will greatly influence financial return,
other factors being equal. However, there is also an indication that shortening the
cycle time may result in shortcuts and poor quality work which will more than
overpower the positive gains. Another concern is that the metric could cause a firm
to move to shorter term, faster projects which inherently do not have the impact of
longer, more strategic projects.
The metric is probably most useful as an internal standard for continual
improvement. The cycle time that should be measured and charted is the interval
between the first indication of a customer need or opportunity to the time that a
successful solution, by an appropriate measure for the industry, is available for
general use by the customers.
20. Customer rating of technical capability/Asset Value of Technology (AVT)
Average customer rating (internal or external) of overall technical capability of the
firm (interval rating scale) in providing technical services and/or new product
innovations. Can be rationed to ratings for relevant competitors for benchmarking
purposes.
This metric relates to Quality of Personnel and Customer Rating of Product
Technology Benefits, but is more future-oriented. It attempts to measure the
customers' perceptions of the ability (not willingness) of the firm to bring value to
the customers' future problems.
Assuming that a technology is used in a variety of markets, the metric should

integrate over the different needs and wants of the customers. A competitor with a
strong technology position having broad value will be the most successful at
meeting the customer needs in many markets, rather than only in a few.
A competitor's indifference to a market niche should not be equated with its
inability to bring technical strength to bear when desired. Consequently, this metric
should not be a weighted average across markets, but an evaluation of the breadth
of capability across the entire range of opportunities.
A customer survey focused on the competitor's ability to use technology to solve
new problems should be used with quantitative rankings.
21. Practice of R&D Process to support Innovation (PRD). Number and
quality of patents/Asset Value of Technology (AVT)
a. Percent Useful Patents
Percentage of active patents from the company's total patent estate which are
incorporated into products and production process improvement, to defend the
firm's commercial interests in the field.
b. Value Ratio
Interval rating (1 to 5) for potential strategic value times rating (1 to 5) for strength
of protection divided by 25 (maximum attainable value). Yields a number between
0 and 1.
c. Retention Percent
Percent of granted patents maintained.
d. Cost of invention
Number of patents from R&D / R&D effort. One can also calculate this just using
the number of useful patents from R&D.
There is a considerable debate about the validity of using the number of patents as
an indicator of the strength of the technology or the management of technology for
a firm.
Research indicates some negative correlation to financial performance and patent
volume. Also, some firms do not patent extensively as a matter of strategy and
patents are not particularly valuable in other industries.

development
This metric should only be used if patents are considered especially valuable in the
industry and competitors follow a vigorous strategy of creating a patent "forest".
The number of high-quality patents is probably a more useful metric. Internal
assessment of value is one method of determining quality of the patenting activity,
which does not require the lag time of citations or sales development, and which
should relate to succes of the firm's strategy.
The metric should be kept for patents in the key technologies of greatest strategic
value and in the relevant pacing technologies. All patent metrics should be
benchmarked against competitors and compared to exploitation of the current
technology position.
22. Sales protected by proprietary position/Asset Value of Technology (AVT),
a. % Patent Protected Sales
Percentage of sales protected by patents owned by the company
b. % Proprietary Sales
Percentage of sales protected by patents plus trade secrets and/or other exclusive
company know-how or arrangements.
Sales of products under patent is another means of assessing the value of the
patenting activity. Rigor is required to count only patents that truly protect the
sales, and not background patents. This assumes a strategy of first-filing in the
native country (of the patent) and ignores the potential for protection of sales by
longer-lived counterparts in other countries. The assumption is useful for tracking
the turnover of the patent portfolio.
The % Proprietary Sales metric allows inclusion of proprietary positions achieved
by means other than patents.
23. Peer evaluation/Asset Value of Technology (AVT), Practice of R&D
a. External
Numerical rating (interval rating scale) from 1 to 5 by a panel of external experts
on the merits of the firm's technology positioning and technology management
practices. Panel selections critical must be capable and objective. Could include
outside directors from technology companies or university science / engineering

departments, consultants in technology management, venture capitalists, etc.
b. Internal
Same rating scale applied by internal experts; probably staff on company's
technical ladder.
Peer evaluation is another method of assessing the strength of the technology of a
firm and the management of technology. A variant of this metric(b) is to use an
internal panel of experienced scientists, probably technical ladder rather than
management people, whose responsibility is to form overall judgments on the
technology positioning and management of the firm. In either case, consistency of
the panel over the time is important in identifying and making improvements.
24. Customer satisfaction / Asset Value of Technology (AVT), Practice of
a. External
Average rating by key external customers using a 1 to 5 interval rating scale to
evaluate various dimensions regarding product technology or process technology
benefits and technical service provided.
b. Internal
Same rating approach along dimensions important to key internal customers, such
as marketing, engineering, manufacturing etc.; dimensions would include, for
example, timeliness of developments, competitiveness of solutions etc.
Customer ratings of Quality of Personnel, Technical Capability and Product
Technology Benefits speak about external customer satisfaction.
Recognizing that the first customer for technology management is internal,
customer satisfaction surveys should be used to determine satisfaction from
engineering, production and marketing along axes that are important to them: ontime delivery of technology development; competitiveness of solutions developed;
general satisfaction with the job being done.
25. Customer contact time/Asset Value of Technology (AVT), Practice of R&D
Average hours per researcher spent in direct contact with external (or internal
customers).

development
26. Efficiency of internal technical processes/Portfolio Assessment (PA),

a. Project Assessment
The total cost of all commercially successful projects divided by the number of
commercially successful projects.
b. Portfolio Assessment
The total R&D budget divided by the number of projects with commercial output.
Subdivide by projects of similar type (technical service, short-term, long-term) and
use in conjunction with project value assessment.
There are many metrics of this type that relate to the efficiency of the daily
processes. Examples are turn around time for customer service requests and
amount of money spent per customer service request. Internal services as analytical
service, computer service, or library service can be measured in the same way.
27. Employee morale/Practice of R&D Process to support Innovation (PRD)
Quantitative ratings of key aspects of employee satisfaction and morale as
shown by direct employee survey.
Employee morale or job satisfaction are generally thought to be a direct input to
motivation and productivity. The level or extent of motivation may be more useful
metric since it is closer to productivity. Motivation can be measured by a direct
survey, or more qualitatively through focus group discussions.
28. Empowerment/Practice of R&D Process to support Innovation (PRD)
Interval rating scale is assesing the extent to which participants feel they have the
support and freedom they need to be successful in the project.
This measurement has also been reported to correlate positively with successful
innovation from R&D. It is also likely related to employee morale on a project
team.
Most companies attempt to project future sales and income from projects; the
cumulative value of these projects represents the projected value in total.
Such projections must always be done with a careful understanding of the
assumptions behind the probability determinations. Care must be taken not to let
biases for or against individual projects influence the assignment of probabilities of
success for the various projects.
ANNEX 1
UNION POLICY
on ENVIRONMENT
and sustainable investments
THE INTEGRATION OF ENVIRONMENTAL POLICIES INTO UNION
POLICIES
Current situation and prospects
Environment and employment
A strategy for integrating the environment into EU policies
Integrating the environment into Community energy policy
Approaches to sustainable agriculture
Integration of the environmental dimension in developing countries
Strategy for integrating the environment into the single market
Strategy for integrating the environment into industry
Strategy for integrating environmental considerations into the common
fisheries policy
Integrating the environmental dimension into sustainable development of
the urban environment
APPLICATION AND CONTROL OF COMMUNITY ENVIRONMENTAL
LAW
Freedom of access to information
Aarhus Convention on access to information, public participation and
access to justice in environmental matters
Implementation and enforcement of Community environmental law (19961997)
ENVIRONMENTAL INSTRUMENTS
Life: a financial instrument for the environment
Environmental Taxes and Charges in the Single Market
European Environment Agency
Eco-label
Community eco-management and audit scheme
Assessment of the effects of plans and programmes on the environment
Environmental inspections: minimum criteria
MANAGEMENT OF WASTE
Packaging and packaging waste
The landfill of waste
Waste disposal
Waste management statistics
Disposal of PCBs and PCTs
Disposal of spent batteries and accumulators
Disposal of waste oil
End-of-life vehicles
Competitiveness of the recycling industries
Supervision and control of transfrontier shipments of waste
Removal and disposal of disused offshore oil and gas installations
Use of sewage sludge in agriculture
Incineration
Waste incineration
Incineration of dangerous waste
Incineration plants
New incineration plants
Hazardous waste
Controlled management of hazardous waste
Supervision and control of the transfrontier shipment of hazardous
waste
Basel Convention on the control of transboundary movements of
hazardous waste
Radioactive waste and substances
Transfer of radioactive waste: supervision and control
Shipments of radioactive substances
Community plan of action 1980-1999
Present situation and prospects for radioactive waste management
Titanium dioxide
Disposal
Surveillance and monitoring
Programmes for the reduction of pollution
NOISE POLLUTION
Action against noise: Green Paper
Motor vehicles
Motorcycles
Household appliances
Lawnmowers
Emissions from construction plants
Annex
Tower cranes
Noise emission by equipment used outdoors
Subsonic civil jet aircraft
AIR POLLUTION
Motor vehicles
Petrol engines, diesel engines
Emission of gaseous pollutants from diesel engines
New limit standards for diesel engines
Sulphur content of certain liquid fuels
Petrol and diesel fuel quality
Gaseous pollutants emitted by mobile equipment other than road
vehicles
Gaseous pollutants emitted by agricultural or forestry tractors
CO2 emissions from new passenger cars
Fuel economy of new cars
Environmental problems caused by heavy goods vehicles
Industry
Pollution from large combustion plants
Volatile organic compounds (VOCs) resulting from the storage of
petrol
Volatile organic compounds (VOCs) resulting from certain
industrial activities in certain installations
Integrated pollution prevention and control
Biosphere
Management and quality of ambient-air
Sulphur dioxide, nitrogen dioxide and nitrogen oxides, particulates
and lead in the ambient air
National emission ceilings for certain atmspheric polluants
Exchange of information and data on ambient air quality
Nitrogen dioxide
Nitrogen emissions from civil subsonic jet aeroplanes
Ozone
Ozone-depleting substances
Substances which damage the ozone layer
Lead
Greenhouse gas emissions
Phaseout of CFCs in metered dose inhalers
Kyoto Protocol on climate change
Community post-Kyoto strategy
Transport and CO2
WATER POLLUTION
Community water protection and management policy
Water: Community action
Ecological quality of water
Helsinki Convention on transboundary watercourses and international
lakes
Drinking water
General provisions
New requirements
Surface freshwater: quality and control requirements
Surface fresh water: methods of measurement and analysis
Bathing water
Urban waste water treatment
Shellfish waters
Water suitable for fish-breeding
Marine pollution
Barcelona Convention on the protection of the Mediterranean Sea
Helsinki Convention on the protection of the Baltic Sea
Paris Convention on the protection of the marine environment of
the North-East Atlantic
Accidental marine pollution
Discharges of substances
Nitrates
Discharges of dangerous substances
Mercury
Other dangerous substances: protection of the aquatic environment
Other dangerous substances: protection of groundwater
PROTECTION OF NATURE AND BIODIVERSITY
Biodiversity
Bern Convention on the conservation of the European wildlife and
natural habitats
Natural habitats (Natura 2000)
Rio de Janeiro Convention on biological diversity
Fauna and flora
Endangered species of wild flora and fauna
Canberra Convention on conservation of Antarctic marine living
resources
Conservation of wild birds
Bonn Convention on the conservation of migratory species of wild
animals
The keeping of wild animals in zoos
Annex
Protection of animals used for experimental purposes

Marine fauna: cetaceans, certain species of seal pups, dolphins
Forests
Protection of forests against fire
Protection of forests against atmospheric pollution
Tropical forest conservation
Conservation and sustainable management of tropical forests and
other forests in developing countries
Forests and development
Genetically modified organisms
Contained use of genetically modified micro-organisms
Deliberate release into the environment of genetically modified
organisms
INDUSTRIAL RISKS
Major accidents involving dangerous substances
Transboundary effects of industrial accidents
ENLARGEMENT
Accession strategies for the environment
Applicant countries and the Community acquis
To be admitted at 1 january 2004
Bulgaria
Romania
Admitted at 1 may 2004
Cyprus
Estonia
Hungary
Latvia
Lithuania
Malta
Poland
Czech Republic
Slovakia
Slovenia
Turkey
Assessment of the effects of plans and programmes on the environment
1) OBJECTIVE
To supplement the existing system for assessing the environmental impact of
projects with measures to help assess, at the design stage, the environmental impact
of plans and programmes linked to town and country planning.
2) PROPOSAL
Proposal for a Council Directive on the assessment of the effects of certain
plans and programmes on the environment.
3) CONTENTS
1. Directive 85/337/EEC on the assessment of the effects of certain public and
private projects on the environment [Official Journal L 175, 5.7.1985] introduced a
system for the prior assessment, by the Member States, of the possible effects of
public and private projects on the environment. The scope of Directive 85/337/EEC
covers construction work or other installations or schemes and interventions in the
natural surroundings or landscape. The Directive put in place a consultation
procedure for projects which are likely to have a significant impact on the
environment of one or more of the other Member States.
2. The aim of this proposal for a Directive is to supplement the system for
assessing the environmental impact of projects, as laid down in Directive
85/337/EEC, by measures which apply during the preparation of plans and
programmes linked to town and country planning. The assessment and consultation
procedure provided for in the proposal for a Directive is similar to that laid down in
Directive 85/337/EEC.
3. The proposal applies to plans and programmes linked to town and country
planning (in sectors such as transport, energy, waste management, resource
management, industry, telecommunications and tourism) and to any significant
modifications of such plans and programmes which are drawn up and adopted by a
competent authority or which are drawn up by a competent authority with a view to
adoption by means of a legislative act, and which provide the framework for
subsequent consent for specific projects.
4. Prior to the adoption of a plan or programme or its submission to the legislative
process, the competent authority of the Member State concerned will be required to
carry out an environmental assessment and, after consulting the competent
environmental bodies, to prepare an environmental statement setting out:
the contents of the plan or programme and its main objectives;
Annex
the environmental characteristics of any area likely to be significantly

affected by the plan or programme;
any existing environmental problems which are relevant to the plan or
programme;
the national, Community or international environmental protection
objectives which are relevant to the plan or programme in question;
the likely environmental effects of implementing the plan or programme;
any alternative solution which might be considered.
The statement must also include a non-technical summary of this information.

5. The authorities or bodies responsible for the environment and the public
concerned will be able to express their views on the proposed plan or programme
prior to its adoption or submission to the legislative process.
6. The Member State responsible for drawing up the plan or programme will be
required to send a copy of the plan or programme, together with the environmental
statement, to other Member States:
where it considers that the plan or programme is likely to have
environmental effects on the territory of those other Member States;
at the request of the other Member States concerned.
At the request of those Member States, consultations will then be started with the
Member State which is responsible for the transboundary effects of the plan or
programme.
7. The results of the assessment procedure (the environmental statement and the
opinions expressed) must be taken into account by the competent authority before
the plan/programme is adopted.
8. When a plan or programme is adopted, the Member State responsible will
inform all of the parties concerned which have been consulted.
4) OPINION OF THE EUROPEAN PARLIAMENT
First reading: the amendments proposed by the Parliament essentially relate to the
scope of the proposal and the monitoring of the environmental assessment
procedures provided for in the proposal. They are also aimed in particular at
including agriculture, forestry and fisheries among the fields to be covered by the
proposal and introducing:
appropriate deadlines for the administrative procedures for analysis of the
environmental impact assessment (EIA) and for making the environmental
impact statements (EIS);
monitoring of the quality of the environmental statement provided for in

the proposal;
follow-up and surveillance requirements.
Other amendments are concerned with laying down additional procedures and
extending the items of information which must be given in the environmental
statements.
Community eco-management and audit scheme
1) OBJECTIVE
To work to prevent pollution by setting up a Community scheme to limit the
environmental impact of industrial activity.
2) COMMUNITY MEASURES
Council Regulation (EEC) No 1836/93 of 29 June 1993 allowing voluntary
participation by companies in the industrial sector in a Community ecomanagement and audit scheme.
3) CONTENTS
1. The objective of the Community eco-management and audit scheme (EMAS) is
to promote improvements in the environmental performance of industries by:
implementing and evaluating the effectiveness of environmental
management policies, programmes and systems in relation to their sites;
public information.
2. Each Member State must designate a competent body to perform the tasks set
out in the Regulation.
3. Any business wishing to take part in the scheme must:
adopt an environment policy setting out the objectives and principles of its
environmental action;
conduct an environmental review of the site;
introduce an environmental programme for the site specifying the
objectives and measures to be taken to implement the abovementioned
environment policy;
introduce an environmental management system;
carry out regular environmental audits and make an environmental
statement.
Annex
All the above must be examined by an accredited environmental verifier

independent of the company. Each Member State must establish a system for the
accreditation of verifiers and for the supervision of their activities in accordance
with the provisions of the Regulation. A list of accredited verifiers must be sent
regularly by each Member State to the Commission, which must publish an overall
Community list in the Official Journal of the European Communities.
4. The Regulation establishes procedures for carrying out environmental audits and
making environmental statements. It also provides for recognition of any parts of
existing national, European and international standards which are equivalent to the
requirements of the Regulation.
5. The sites taking part in the EMAS scheme are registered by the competent
bodies on condition that:
they have supplied a validated environmental statement to those bodies;
they have paid the registration fees, if necessary;
they meet all the requirements laid down in the Regulation.
The list of sites is updated each year by the competent bodies.
6. Environmental verifiers accredited in one Member State may perform their
activities in any other Member State.
7. The Regulation commits the Member States to encourage the participation of
small and medium-sized undertakings in the eco-management and audit scheme.
8. The Member States are responsible for applying penalties in the event of failure
to comply with the Regulation.
MANAGEMENT OF WASTE
Waste disposal
1) OBJECTIVE
To set up a system for the coordinated management of waste within the
Community in order to limit waste production.
Council Directive 75/442/EEC of 15 July 1975 on waste.
Amended by the following measures:
Council Directive 91/156/EEC of 18 March 1991;
Council Directive 91/692/EEC of 23 December 1991;
Commission Decision 96/350/EC of 24 May 1996;

Council Directive 96/59/EC of 16 September 1996.
3) CONTENTS
1. These measures apply to all substances or objects which the holder disposes of
or is obliged to dispose of in pursuance of the national provisions in force in the
Member States. They do not apply to radioactive waste, mineral waste, annual
carcasses and agricultural waste, waste water, gaseous effluents and wastes that are
subject to specific Community Regulations.
2. Member States must prohibit the uncontrolled discarding, discharge and disposal
of waste. They shall shall promote the prevention, recycling and conversion of
wastes with a view to their reuse. They shall inform the Commission of any draft
Regulations which may involve the use of products which can give rise to technical
difficulties and excessive disposal costs and which may encourage decreasing as
regards the quantities of certain wastes, the treatment of waste for the purpose of
their recycling or their reuse, the use of energy deriving from certain wastes or the
use of natural resources which may be replaced by reclamation materials.
3. The measures provide for cooperation between the Member States with a view to
setting up an integrated, adequate network of disposal installations (taking account
of the best technologies available) which would enable the Community itself to
dispose of its wastes and the Member States individually to work towards that aim.
That network would have to enable waste to be disposed of in one of the closest
installations that guaranteed a high level of environmental protection.
4. Member States shall ensure that all holders of wastes shall hand them over to a
private or public collection agency or to a disposal company, or else shall
themselves conduct the disposal in compliance with the requirements of the current
measures.
5. Companies or establishments treating, storing or dumping waste for another
party must obtain an authorization from the competent authority which concerns, in
particular, the types and quantities of waste to be treated, the general technical
requirements and the precautions to be taken. The competent authorities may
routinely check compliance with those authorization conditions. The same
monitoring by the competent authority is reserved for transport, collection, storage,
dumping or treatment companies working on their own account or for third parties.
6. Upgrading centres and companies disposing of their own wastes have to get an
authorization.
Annex
7. The cost of disposal of waste must be borne by its holder, who will hand over his
waste to a collector or company and/or else by earlier holders or by the producer
who has generated the waste in accordance with the "polluter pays" principle.
8. The competent authorities appointed by the Member States in order to
implement the current measures shall draw up at least one management plan
governing, in particular, the types, quantities and origins of the wastes to be
upgraded or disposed of, the general technical requirements, all of the special
arrangements concerning specific wastes, and the appropriate locations and
installations for the disposal.
Environmental Taxes and Charges in the Single Market
1) OBJECTIVE
To promote the use of fiscal instruments by Member States to increase the efficacy
of environmental policy and ensure that environmental taxes and charges are used
in accordance with Community legislation.
2) COMMUNITY MEASURE
Commission Communication of 26 March 1997 on environmental taxes and
charges in the Single Market.
3) CONTENTS
1. In addition to framework measures harmonised at Community level, the
implementation of an environmental policy also requires the provision of a number
of economic, technical or fiscal instruments.
2. The fifth Environmental Action Programme includes the broadening of the range
of environmental policy instruments as one of its key priorities. On several
occasions, the Commission has been invited to explore the potential of new
instruments, in particular of a fiscal nature.
3. Environmental taxes and charges can be a way of implementing the "polluter
pays" principle by inducing consumers and producers to adopt more
environmentally compatible behaviour.
4. The Commission has frequently encouraged the use of fiscal instruments by
Member States. In this Communication, the Commission presents the applicable
legal framework and sets out Member States' options and obligations in accordance
with the rules of the Single Market.
5. The Commission defines taxes and charges as covering all compulsory

unrequited payments, whether the revenue accrues directly to the Government
budget or is destined for particular purposes (e.g. earmarking).
The word "levy" is used to cover taxes and charges. A levy is considered as
environmental if the taxable base of the levy has a negative effect on the
environment
6. There are two categories of environmental levies:
those charged on pollutant emissions (taxes on water pollution and on
noise emissions in the field of aviation);
those charged on products (taxes on pesticides, excise on gasoline).
7. Member States have considerable room for manoeuvre in fiscal matters (the
annex contains a table of current national taxes). The revenue may be used to
finance environmental protection activities, but also to decrease other taxes which
are perceived as distorting the economy (such as labour taxes).
However, it is important to fix the level of environmental taxes and charges at an
appropriate level to ensure that they have a real effect on the market.
8. Member States must take into account the following provisions of the Treaty
when adopting environmental instruments of a fiscal nature:
customs duties levied on intra-Community trade, or charges having
equivalent effect (Articles 9 to 12);
quantitative restrictions on imports and exports of goods between the
Member States, or measures having equivalent effect (Articles 30 to 36);
provisions on transport policy, that are less favourable in their effect on
carriers of other Member States (Article 76);
State aid creating distortions of competition affecting intra-Community
trade (Articles 92 to 93);
internal taxation discriminating against products of other Member States or
otherwise protecting national production (Article 95) if it results from the
application of objective and non-discriminatory criteria, and if the system
is transparent;
legislation concerning excise duties and other forms of indirect taxation
based on Article 99;
Article 130r stating the objectives of Community environmental policy:
Member States must establish the need for a levy to solve environmental
problems.
9. Member States must ensure that environmental taxes and charges are compatible
with their Community obligations (competition, Single Market and fiscal policy)
and with their obligations towards third countries (WTO rules).
Annex
10. The Commission's strategy is as follows:

to collect Member States' experiences of environmental taxation;
to analyse the economic and environmental effects of existing levies;
to monitor the effects of the levies on the Single Market and the
competitiveness of European industry.
11. Commission control mechanisms can be triggered in various ways:
notification of State aids;
notification of areas covered by Directive 83/189/EEC (laying down a
procedure for the provision of information in the field of technical
standards and regulations) and secondary Community legislation;
notification of national measures transposing the Directives;
complaints by firms or Member States;
the Commission's own-initiative investigations.
Eco-label
1) OBJECTIVE
To establish a voluntary Community eco-label award scheme for clean products.
Council Regulation (EEC) No 880/92 of 23 March 1992 on a Community ecolabel award scheme.
3) CONTENTS
1. The Regulation institutes a Community eco-label award scheme. It aims at:
promoting the design, production, marketing and use of products which
have a reduced environmental impact during their entire life cycle;
providing consumers with better information on the environmental impact
of products.
2. The following are excluded from the Regulation's scope:
foodstuffs;
drinks;
pharmaceutical products;
substances or preparations classed as dangerous within the meaning of
Directives 67/548/EEC (Official Journal L 196, 16.08.1967) and
88/379/EEC (Official Journal L 187, 16.07.1988). The label may, however,
be awarded to products containing a dangerous substance or preparation if
such products meet the objectives mentioned under 1;
products manufactured by processes likely to significantly harm human

beings and/or the environment.
3. The eco-label is optional. It is awarded to product groups that have been defined
in a procedure involving major interest groups, the Commission and a committee
set up by the Regulation.
4. The specific ecological criteria applicable to each product groups are:
those described under 1;
Community requirements regarding safety, health and the environment;
the parameters listed in the indicative assessment matrix (Annex 1).
5. The period of validity for product groups is approximately three years. The
period of validity of a criterion shall not exceed the period of validity of the
product group to which it refers.
6. Applications for the award of a European eco-label:
manufacturers or importers apply to the competent body designated by the
Member State in which the product has been manufactured, first marketed
or imported from a non-member country;
the competent body assesses whether the product conforms to the criteria
of the eco-label;
if, after its evaluation, the competent body decides to award the label, it
notifies its decision to the Commission which in turn informs the other
Member States;
if no objections have been made within 30 days, the competent body may
award the label by concluding a contract with the applicant. If an objection
is raised, the decision on the proposed award is taken at Community level
by the Commission;
the label is awarded for a determined period of production which may not
exceed the duration of validity of the criteria.
7. Any product to which the eco-label is awarded is recognisable by the logo
representing a daisy which is affixed to it.
8. The awarding of a label in one Member State makes it valid throughout the
Community.
9. The cost of awarding the label is ECU 500. The use of the label is subject to the
payment of a fee by the user.
10. In the Official Journal of the European Communities, the Commission
publishes:
product groups and their corresponding ecological criteria and the duration
of their respective validity;
Annex
the list of products to which an eco-label has been awarded, the name of
the manufacturers or importers and the date when such labels expire;
the names and addresses of the competent bodies.
11. The Commission will examine before 1998 how this regulation is applied.
4) DEADLINE FOR IMPLEMENTATION OF THE LEGISLATION IN
THE MEMBER STATES
Not required.
5) DATE OF ENTRY INTO FORCE (if different from the above)
01.05.1992
6) REFERENCES
Official Journal L 99, 11.04.1992
7) FOLLOW-UP WORK
On 19 March 1997, the Commission presented a proposal for a regulation
establishing a revised Community Eco-label Award Scheme [COM(96)603 final Official Journal C 114, 12.04.1997 - 96/312COD].
This proposal aims to replace Regulation (EEC) No 880/92. It aims in particular to
extend the scope of Regulation (EEC) No 880/92, to specify the criteria for
awarding the eco-label and the requirements as regards the assessment of
conformity of the products.
Co-decision procedure
First reading: On 13 May 1998 Parliament approved the Commission proposal
subject to certain amendments [Official Journal C 167, 01.06.1998].
The Commission has accepted some of the amendments [COM(1999) 21 final,
Official Journal C 64, 06.03.1999]. On the 11 November 1999 the Council adopted
its common position, which is currently before the Parliament for a second reading.
8) COMMISSION IMPLEMENTING MEASURES
Decision 93/326/EEC - Official Journal L 129, 27.05.1993
Commission Decision of 13 May 1993 establishing guidelines for the fixing of
costs and fees in connection with the Community eco-label.
Decision 93/517/EEC - Official Journal L 243, 29.09.1993
Commission Decision of 15 September 1993 on a standard contract covering the

terms of use of the Community eco-label.
This Decision was taken pursuant to Regulation (EEC) No880/92. It establishes a
contract model to be respected between the competent body and each applicant and
contains provisions on compliance monitoring making it possible to guarantee that
products which benefit from the label meet the award criteria determined by the
Regulation..
Decision 94/10/EC - Official Journal L 7, 11.01.1994
Commission Decision of 21 December 1993 on a standard summary form for the
notification of a decision to award the Community eco-label.
This summary form of a product's results assessment:
is addressed to the competent bodies of the Member States responsible for
awarding the eco-label;
serves to notify the Commission that a label has been awarded.
Commission Decisions establishing ecological criteria for the award of a
Community eco-label:
Decision 93/430/EEC (washing machines) - Official Journal L 198, 07.08.1993
Decision 93/431/EEC (dishwashers) - Official Journal L 198, 07.08.1993
Decision 94/923/EC (soil improvers) - Official Journal L 364, 31.12.1994
Decision 94/924/EC (toilet paper) - Official Journal L 364, 31.12.1994
Decision 94/925/EC (kitchen paper) - Official Journal L 364, 31.12.1994
Decision 96/467/EC (copying paper) - Official Journal L 192, 02.08.1996
Decision 95/365/EC (laundry detergents) - Official Journal L 217, 13.09.1995
Decision 95/533/EC (single-ended light bulbs) - Official Journal L 302,
15.12.1995
Decision 96/13/EC (indoor paints and varnishes) - Official Journal L 4,
06.01.1996
Decision 96/304/EC (bed linen and T-shirts) - Official Journal L 116,
11.05.1996
Decision 96/337/EC (double-ended light bulbs) - Official Journal L 128,
29.05.1996
Decision 96/461/EC (washing machines) - Official Journal L 191, 01.08.1996
Decision 96/703/EC (refrigerators) - Official Journal L 323, 13.12.1996
Decision 98/94/EC (toilet paper, kitchen rolls and other tissue-paper products)
- Official Journal L 19, 24.01.1998
Decision 98/483/EC (dishwashers) - Official Journal L 216, 04.08.1998
Decision 98/488/EC (soil improvers) - Official Journal L 219, 07.08.1998
Decision 98/634/EC (mattresses) - Official Journal L 302, 12.11.1998
Decision 1999/10/EC (paints and varnishes) - Official Journal L 5, 09.01.1999
Annex
Decision 1999/178/EC (textile products) - Official Journal L 57, 05.03.1999

Decision 1999/179/EC (footwear) - Official Journal L 57, 05.03.1999
Decision 1999/205/EC (personal computers) - Official Journal L 70, 17.03.1999
Decision 1999/427/EC (detergents for dishwashers) - Official Journal L 167,
02.07.1999
Decision 1999/476/EC (laundry detergents) - Official Journal L 187, 20.07.1999
Decision 1999/554/EC (copying paper) - Official Journal L 210, 10.08.1999
Decision 1999/568/EC (light bulbs) - Official Journal L 216, 14.08.1999
ANNEX 2
FACTORS USED
IN INVESTMENT PROJECTS
FACTOR
COMPOUND FACTOR : shows what
becomes a present sum in the future
FUTURE VALUE OF UNIFORM SERIES
allows the calculation of the future value of a
constant sum in an annual deposit to a
preestablished interest.
SINKING FUND FACTOR is the opposite
to the Future Value of Uniform Series and
shows what sum is necessary to be
economized periodically (for a year) to
reach to a certain sum of money in the
future.
DISCOUNTING FACTOR shows which is
the present value of a future sum
ANUITY FACTOR shows which is the value
in present of an incremental annually sum
received or for debt (i.e royalties for patents
or trademarks, rents etc..)
RELATIONSHIP
f c = (1 + ra )
f can
ra
f ran =
ra
(1 + ra )h 1
fa =
1
(1 + ra )h
(1 + ra )h 1
(1 + ra )h ra or
h
1 (1 + ra )
=
f anu =
f anu
CAPITAL RECOVERY FACTOR is the

opposite of annuity factor and represents the
annual sum that have to be payed or
received to grant a loan.It is used for
mortgage calculations.
h
(
1 + ra ) 1
=
f rec
ra
h
(
1 + ra ) ra
=
(1 + ra )h 1 or
f rec =
ra
h
1 (1 + ra )
Annex 2
RATES USED IN INVESTMENTS

Rate: The ratio between two economical measurements expreemed in percentage.
RATE
NOTE
RELATIONSHIP
Discount rate
ra
ra = rn sau ra=rc+rg
Capitalization rate
rc
rc = venit/valoare
Growth rate;
rg
rg = ra-rc
Real interest rate
rd
rd = ra-(ri+rg+ri)
Inflation rate
ri
ri = 100 (preuri an t- preturi
an t-1)/ preuri an t-1
Nominal rate of interest
rn
rn = rd+ri
Profitability rate
rp
rp = Profit/ costs
Amortization rate
ra
ra = asets total amortization
Risk rate
rr
Tax rate
rt
Net income rate
rvn (NIR)
Own capital yeld rate.
rrcp
rrcp = income/ own capital
Annex 3
Indicators
Compound factors z=(1+ ra)h
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ra=10 %
Monthly
compound
1
1.008333333
1.016736111
1.025208912
1.03375232
1.042366922
1.051053313
1.059812091
1.068643858
1.077549224
1.086528801
1.095583207
Trimestrial
Semestrial
Annual
1
1.008264838
1.016597983
1.025
1.033471459
1.042012932
1.050625
1.059308245
1.068063256
1.076890625
1.085790951
1.094764837
1
1.008164846
1.016396357
1.024695077
1.033061554
1.041496343
1.05
1.058573088
1.067216175
1.07592983
1.084714632
1.09357116
1
1.00797414
1.016011868
1.024113689
1.032280115
1.040511662
1.048808848
1.057172197
1.065602237
1.074099499
1.082664519
1.091297838
1.104713067
1.220390961
1.348181842
1.489354099
1.645308935
1.81759428
2.007920153
2.218175631
2.450447605
2.707041491
2.990504109
3.303648968
3.649584185
4.03174334
4.453919552
4.92030313
5.435523164
6.004693467
6.633463339
7.328073633
8.095418702
8.943114826
9.879575812
10.9140965
12.05694502
13.31946472
14.71418673
16.25495436
17.95706049
19.83739937
1.103812891
1.218402898
1.344888824
1.484505621
1.63861644
1.80872595
1.996495019
2.203756938
2.432535316
2.685063838
2.963808077
3.271489561
3.611112349
3.98599236
4.399789749
4.856544641
5.360716578
5.917228062
6.531512612
7.209567816
7.958013891
8.784158317
9.696067184
10.70264395
11.81371635
13.04013239
14.39386623
15.88813509
17.53752832
19.35814983
1.1025
1.21550625
1.340095641
1.477455444
1.628894627
1.795856326
1.979931599
2.182874588
2.406619234
2.653297705
2.92526072
3.225099944
3.555672688
3.920129138
4.321942375
4.764941469
5.253347969
5.791816136
6.38547729
7.039988712
7.761587555
8.55715028
9.434258183
10.40126965
11.46739979
12.64280826
13.93869611
15.36741246
16.94257224
18.67918589
1.1
1.21
1.331
1.4641
1.61051
1.771561
1.9487171
2.14358881
2.357947691
2.59374246
2.853116706
3.138428377
3.452271214
3.797498336
4.177248169
4.594972986
5.054470285
5.559917313
6.115909045
6.727499949
7.400249944
8.140274939
8.954302433
9.849732676
10.83470594
11.91817654
13.10999419
14.42099361
15.86309297
17.44940227
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex

Month n= Monthly compound
0
1
1
1.009166667
2
1.018417361
3
1.027752854
4
1.037173921
5
1.046681349
6
1.056275928
7
1.065958457
8
1.075729743
9
1.085590599
10
1.095541846
11
1.105584313
Year h=
1
1.115718836
2
1.244828521
3
1.388878629
4
1.549598048
5
1.72891573
6
1.928983847
7
2.152203612
8
2.40125411
9
2.679124441
10
2.989149603
11
3.335050516
12
3.720978681
13
4.151566003
14
4.631980389
15
5.167987769
16
5.766021299
17
6.433258574
18
7.177707769
19
8.008303758
20
8.935015349
21
9.968964927
22
11.12256195
23
12.40965187
24
13.84568234
25
15.44788859
26
17.23550028
27
19.22997231
28
21.45524233
29
23.938018
30
26.70809758
ra= 11 %
Trimestrial
1
1.0090839
1.018250316
1.0275
1.036833707
1.0462522
1.05575625
1.065346634
1.075024136
1.084789547
1.094643666
1.104587299
Semestrial
1
1.008963394
1.01800713
1.027131929
1.036338517
1.045627628
1.055
1.064456381
1.073997522
1.083624185
1.093337136
1.103137147
Annual
1
1.008734594
1.017545481
1.026433327
1.035398805
1.044442593
1.053565375
1.062767841
1.072050686
1.081414614
1.090860331
1.100388553
1.114621259
1.242380552
1.384783775
1.543509436
1.720428431
1.917626105
2.137426824
2.382421379
2.655497517
2.959873987
3.299138471
3.677289878
4.098785475
4.568593428
5.092251361
5.675931625
6.326514056
7.051667065
7.859938025
8.76085402
9.765034141
10.88431465
12.13188851
13.52246085
15.07242234
16.80004237
18.72568438
20.87204591
23.2644261
25.93102392
1.113025
1.238824651
1.378842807
1.534686515
1.708144458
1.901207486
2.116091462
2.355262699
2.621466266
2.917757491
3.247537031
3.614589904
4.023128928
4.477843075
4.983951288
5.547262383
6.174241714
6.872085383
7.648802834
8.513308774
9.475525498
10.54649677
11.73851456
13.06526017
14.5419612
16.18556637
18.01494001
20.0510786
22.31735176
24.83977045
1.11
1.2321
1.367631
1.51807041
1.685058155
1.870414552
2.076160153
2.30453777
2.558036924
2.839420986
3.151757295
3.498450597
3.883280163
4.31044098
4.784589488
5.310894332
5.895092709
6.543552907
7.263343726
8.062311536
8.949165805
9.933574044
11.02626719
12.23915658
13.5854638
15.07986482
16.73864995
18.57990145
20.62369061
22.89229657
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

0
1
1
1.01
2
1.0201
3
1.030301
4
1.04060401
5
1.05101005
6
1.061520151
7
1.072135352
8
1.082856706
9
1.093685273
10
1.104622125
11
1.115668347
Year h=
1
1.12682503
2
1.269734649
3
1.430768784
4
1.612226078
5
1.816696699
6
2.047099312
7
2.306722744
8
2.599272926
9
2.928925793
10
3.300386895
11
3.718958562
12
4.190615594
13
4.722090543
14
5.320969818
15
5.995801975
16
6.756219742
17
7.613077514
18
8.578606299
19
9.666588301
20
10.89255365
21
12.2740021
22
13.83065279
23
15.58472574
24
17.56125905
25
19.78846626
26
22.29813909
27
25.12610125
28
28.3127198
29
31.90348134
30
35.94964133
ra=12 %
Trimestrial
1
1.009901634
1.01990131
1.03
1.040198683
1.05049835
1.0609
1.071404644
1.0820133
1.092727
1.103546783
1.114473699
Semestrial
1
1.009758794
1.019612822
1.029563014
1.039610308
1.049755651
1.06
1.070344322
1.080789592
1.091336795
1.101986926
1.11274099
Annual
1
1.009488793
1.019067623
1.028737345
1.03849882
1.048352921
1.058300524
1.068342519
1.0784798
1.088713271
1.099043846
1.109472446
1.12550881
1.266770081
1.425760887
1.604706439
1.806111235
2.032794106
2.287927676
2.575082756
2.898278328
3.262037792
3.671452273
4.132251879
4.650885895
5.234613049
5.891603104
6.631051199
7.463306544
8.400017267
9.454293438
10.64089056
11.97641607
13.4795618
15.17136556
17.07550559
19.21863198
21.63073961
24.345588
27.40117378
30.84026249
34.71098714
1.1236
1.26247696
1.418519112
1.593848075
1.790847697
2.012196472
2.260903956
2.540351685
2.854339153
3.207135472
3.603537417
4.048934641
4.549382963
5.111686697
5.743491173
6.453386682
7.251025276
8.147252
9.154252347
10.28571794
11.55703267
12.98548191
14.59048748
16.39387173
18.42015427
20.69688534
23.25502037
26.12934089
29.35892742
32.98769085
1.12
1.2544
1.404928
1.57351936
1.762341683
1.973822685
2.210681407
2.475963176
2.773078757
3.105848208
3.478549993
3.895975993
4.363493112
4.887112285
5.473565759
6.13039365
6.866040888
7.689965795
8.61276169
9.646293093
10.80384826
12.10031006
13.55234726
15.17862893
17.00006441
19.04007214
21.32488079
23.88386649
26.74993047
29.95992212
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex
Discounting factor z =
1
for ra= 10 %
(1 + ra )h

0
1
1
0.991735537
2
0.983539376
3
0.975410951
4
0.967349704
5
0.959355078
6
0.951426524
7
0.943563494
8
0.935765449
9
0.92803185
10
0.920362166
11
0.912755867
Year h=
1
0.90521243
2
0.819409543
3
0.741739703
4
0.671431999
5
0.607788591
6
0.550177788
7
0.498027772
8
0.45082093
9
0.408088709
10
0.369406972
11
0.334391783
12
0.302695598
13
0.274003818
14
0.248031662
15
0.224521343
16
0.203239511
17
0.183974931
18
0.166536394
19
0.150750814
20
0.136461511
21
0.123526656
22
0.111817864
23
0.101218921
24
0.091624625
25
0.08293975
26
0.075078092
27
0.067961622
28
0.061519705
29
0.055688402
30
0.050409834
Trimestrial
1
0.99180291
0.983673012
0.975609756
0.967612595
0.959680988
0.951814396
0.944012288
0.936274134
0.928599411
0.920987598
0.91343818
Semestrial
1
0.991901279
0.983868147
0.975900073
0.96799653
0.960156996
0.952380952
0.944667885
0.937017283
0.929428641
0.921901457
0.914435235
0.905950645
0.820746571
0.743555885
0.673624934
0.610270943
0.552875354
0.500877784
0.453770551
0.411093723
0.372430624
0.337403764
0.305671157
0.276922982
0.250878554
0.227283588
0.205907713
0.186542225
0.168998049
0.153103892
0.138704569
0.125659494
0.1138413
0.103134599
0.093434856
0.084647368
0.076686338
0.069474037
0.062940049
0.057020578
0.051657829
0.907029478
0.822702475
0.746215397
0.676839362
0.613913254
0.556837418
0.505067953
0.458111522
0.415520655
0.376889483
0.341849871
0.31006791
0.281240735
0.255093637
0.231377449
0.209866167
0.1903548
0.172657415
0.156605365
0.142045682
0.128839621
0.116861334
0.105996675
0.096142109
0.087203727
0.079096351
0.071742722
0.065072764
0.059022915
0.053535524
Annual Month n=
1
0
0.992089
1
0.98424
2
0.976454
3
0.968729
4
0.961066
5
0.953463
6
0.94592
7
0.938436
8
0.931012
9
0.923647
10
0.91634
11
Year h=
0.909091
1
0.826446
2
0.751315
3
0.683013
4
0.620921
5
0.564474
6
0.513158
7
0.466507
8
0.424098
9
0.385543
10
0.350494
11
0.318631
12
0.289664
13
0.263331
14
0.239392
15
0.217629
16
0.197845
17
0.179859
18
0.163508
19
0.148644
20
0.135131
21
0.122846
22
0.111678
23
0.101526
24
0.092296
25
0.083905
26
0.076278
27
0.069343
28
0.063039
29
0.057309
30
Discounting factors z =
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
for ra= 11 %
(1 + ra )h
Monthly
compound
1
0.990916598
0.981915704
0.972996569
0.96415845
0.955400611
0.946722323
0.938122863
0.929601516
0.921157571
0.912790327
0.904499085
Trimestrial
Semestrial
Annual
1
0.990997875
0.982076788
0.97323601
0.964474817
0.955792494
0.947188331
0.938661623
0.930211673
0.921837791
0.913539292
0.905315497
1
0.991116235
0.982311391
0.973584767
0.964935669
0.956363407
0.947867299
0.939446668
0.931100844
0.922829163
0.914630965
0.906505599
1
0.991341
0.982757
0.974247
0.965811
0.957449
0.949158
0.940939
0.932792
0.924715
0.916708
0.90877
0.896283156
0.803323496
0.720005319
0.64532864
0.57839719
0.518407659
0.464640053
0.416449053
0.373256272
0.334543309
0.299845533
0.268746501
0.240872962
0.215890379
0.19349891
0.173429814
0.155442221
0.139320244
0.124870388
0.111919226
0.100311317
0.089907344
0.080582438
0.072224682
0.064733766
0.058019784
0.052002155
0.046608656
0.041774553
0.037441828
0.897165734
0.804906354
0.722134399
0.647874238
0.581250566
0.521478091
0.467852274
0.419741029
0.376577268
0.337852221
0.303109436
0.271939399
0.243974711
0.21888575
0.196376795
0.176182531
0.15806493
0.141810439
0.127227466
0.114144123
0.102406196
0.09187533
0.082427398
0.073951037
0.066346336
0.059523659
0.053402588
0.047910972
0.042984082
0.038563845
0.898452416
0.807216743
0.725245833
0.651598871
0.585430579
0.525981518
0.472569366
0.424581088
0.381465904
0.342728963
0.307925665
0.276656558
0.248562753
0.223321805
0.200644016
0.180269101
0.161963209
0.145516236
0.130739414
0.117463142
0.105535044
0.094818215
0.085189654
0.076538851
0.068766515
0.061783442
0.055509483
0.049872629
0.044808184
0.040258021
0.900901
0.811622
0.731191
0.658731
0.593451
0.534641
0.481658
0.433926
0.390925
0.352184
0.317283
0.285841
0.257514
0.231995
0.209004
0.188292
0.169633
0.152822
0.137678
0.124034
0.111742
0.100669
0.090693
0.081705
0.073608
0.066314
0.059742
0.053822
0.048488
0.043683
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
for ra= 12 %
(1 + ra )h
Monthly
compound
1
0.99009901
0.980296049
0.970590148
0.960980344
0.951465688
0.942045235
0.932718055
0.923483222
0.914339824
0.905286955
0.896323718
Trimestrial
Semestrial
Annual
1
0.990195447
0.980487023
0.970873786
0.961354803
0.951929149
0.942595909
0.933354178
0.924203057
0.915141659
0.906169104
0.897284522
1
0.990335519
0.980764441
0.971285862
0.961898889
0.952602636
0.943396226
0.934278792
0.925249473
0.916307417
0.907451782
0.898681732
1
0.9906
0.981289
0.972065
0.962928
0.953877
0.944911
0.936029
0.927231
0.918515
0.909882
0.901329
0.887449225
0.787566127
0.69892495
0.620260405
0.550449616
0.488496085
0.433515472
0.38472297
0.341422102
0.30299478
0.268892482
0.238628425
0.211770611
0.187935665
0.16678336
0.148011764
0.131352925
0.116569052
0.103449114
0.091805837
0.081473018
0.072303167
0.06416539
0.056943525
0.050534487
0.044846792
0.039799251
0.035319814
0.031344542
0.027816689
0.888487048
0.789409234
0.70137988
0.623166939
0.553675754
0.491933736
0.437076753
0.388337034
0.345032425
0.306556841
0.272371782
0.241998801
0.2150128
0.191036088
0.16973309
0.150805652
0.133988869
0.119047374
0.10577205
0.093977097
0.083497433
0.074186388
0.065913645
0.05856342
0.05203284
0.046230504
0.041075204
0.036494787
0.032425146
0.028809322
0.88999644
0.792093663
0.70496054
0.627412371
0.558394777
0.496969364
0.442300964
0.393646284
0.350343791
0.311804727
0.277505097
0.246978548
0.219810029
0.195630143
0.174110131
0.154957397
0.137911531
0.122740772
0.10923885
0.097222188
0.086527401
0.077009079
0.068537806
0.060998403
0.054288362
0.048316449
0.043001467
0.038271153
0.03406119
0.030314338
0.892857
0.797194
0.71178
0.635518
0.567427
0.506631
0.452349
0.403883
0.36061
0.321973
0.287476
0.256675
0.229174
0.20462
0.182696
0.163122
0.145644
0.13004
0.116107
0.103667
0.09256
0.082643
0.073788
0.065882
0.058823
0.052521
0.046894
0.041869
0.037383
0.033378
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
for ra= 13 %
(1 + ra )h
Monthly
compound
1
0.98928277
0.978680399
0.968191656
0.957815323
0.947550196
0.937395083
0.927348804
0.917410194
0.907578098
0.897851374
0.888228895
Trimestrial
Semestrial
Annual
1
0.989395612
0.978903677
0.968523002
0.958252409
0.948090728
0.938036806
0.9280895
0.918247679
0.908510224
0.898876029
0.889343999
1
0.989559089
0.97922719
0.969003166
0.95888589
0.948874248
0.938967136
0.929163464
0.919462151
0.909862128
0.900362338
0.890961735
1
0.989867
0.979836
0.969908
0.960079
0.950351
0.940721
0.931188
0.921753
0.912412
0.903167
0.894015
0.878709541
0.772130458
0.678478401
0.596185444
0.523873838
0.46033294
0.404498947
0.355437084
0.312325957
0.274443799
0.241156384
0.211906416
0.18620419
0.163619398
0.143773926
0.126335521
0.111012227
0.097547503
0.085715922
0.075319399
0.066183874
0.058156402
0.051102585
0.044904329
0.039457862
0.034672
0.030466617
0.026771307
0.023524203
0.020670942
0.87991305
0.774246975
0.681270017
0.599458379
0.52747125
0.464128836
0.40839302
0.359350348
0.31619706
0.27822592
0.244814618
0.215415577
0.189546977
0.166784859
0.146756174
0.129132672
0.113625524
0.099980581
0.087974218
0.077409662
0.068113772
0.059934197
0.052736882
0.046403871
0.040831371
0.035928057
0.031613566
0.027817189
0.024476708
0.021537375
0.881659283
0.777323091
0.685334119
0.604231188
0.532726036
0.469682854
0.414100249
0.365095328
0.321889685
0.283797029
0.250212285
0.220601984
0.194495787
0.171479016
0.151186066
0.133294599
0.11752042
0.103612969
0.091351336
0.080540754
0.071009503
0.062606188
0.055197326
0.048665235
0.042906156
0.037828611
0.033351946
0.029405053
0.025925238
0.022857227
0.884956
0.783147
0.69305
0.613319
0.54276
0.480319
0.425061
0.37616
0.332885
0.294588
0.260698
0.230706
0.204165
0.180677
0.159891
0.141496
0.125218
0.110812
0.098064
0.086782
0.076798
0.067963
0.060144
0.053225
0.047102
0.041683
0.036888
0.032644
0.028889
0.025565
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
for ra= 14 %
(1 + ra )h
Monthly
compound
1
0.988467875
0.977068739
0.96580106
0.954663322
0.943654025
0.932771688
0.922014848
0.911382058
0.900871886
0.890482918
0.880213758
Trimestrial
Semestrial
Annual
1
0.988598355
0.977326707
0.966183575
0.955167493
0.944277012
0.9335107
0.922867143
0.912344939
0.901942706
0.891659075
0.881492695
1
0.988786899
0.977699532
0.966736489
0.955896375
0.945177813
0.934579439
0.924099906
0.913737881
0.903492046
0.893361099
0.883343751
1
0.98914
0.978399
0.967774
0.957264
0.946868
0.936586
0.926415
0.916354
0.906403
0.89656
0.886824
0.870063023
0.757009663
0.658646116
0.57306363
0.498601475
0.433814706
0.377446134
0.328401925
0.285730371
0.24860343
0.216300652
0.188195199
0.163741684
0.142465584
0.123954037
0.107847824
0.093834404
0.081641845
0.07103355
0.061803666
0.053773084
0.046785972
0.040706744
0.035417433
0.030815399
0.026811339
0.023327555
0.020296443
0.017659184
0.015364603
0.871442228
0.759411556
0.661783298
0.576705912
0.502565884
0.437957134
0.38165434
0.332589709
0.289832717
0.252572468
0.220102314
0.191806451
0.167148241
0.145660036
0.126934306
0.110615914
0.096395379
0.084003004
0.073203765
0.063792852
0.055591785
0.048445029
0.042217044
0.036789715
0.032060111
0.027938534
0.024346819
0.021216846
0.018489256
0.016112318
0.873438728
0.762895212
0.666342224
0.582009105
0.508349292
0.444011959
0.387817241
0.338734598
0.295863916
0.258419003
0.225713165
0.19714662
0.172195493
0.150402212
0.131367117
0.114741128
0.100219345
0.087535457
0.076456858
0.066780381
0.058328571
0.050946433
0.044498588
0.03886679
0.033947759
0.029651288
0.025898583
0.022620826
0.019757905
0.017257319
0.877193
0.769468
0.674972
0.59208
0.519369
0.455587
0.399637
0.350559
0.307508
0.269744
0.236617
0.207559
0.182069
0.15971
0.140096
0.122892
0.1078
0.094561
0.082948
0.072762
0.063826
0.055988
0.049112
0.043081
0.03779
0.033149
0.029078
0.025507
0.022375
0.019627
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
for ra= 15 %
(1 + ra )h
Monthly
compound
1
0.987654321
0.975461058
0.963418329
0.951524275
0.939777062
0.928174876
0.916715927
0.905398446
0.894220688
0.883180926
0.872277458
Trimestrial
Semestrial
Annual
1
0.987803661
0.975756073
0.963855422
0.952099914
0.940487781
0.929017274
0.917686665
0.906494247
0.895438336
0.884517267
0.873729395
1
0.988018908
0.976181363
0.964485644
0.952930053
0.941512911
0.930232558
0.919087356
0.908075686
0.897195948
0.886446561
0.875825964
1
0.988421
0.976976
0.965663
0.954481
0.943429
0.932505
0.921707
0.911034
0.900485
0.890058
0.879752
0.8615086
0.742197069
0.639409158
0.550856489
0.474567603
0.408844071
0.352222683
0.303442871
0.261418643
0.225214409
0.194024151
0.167153474
0.144004156
0.124060819
0.106879462
0.092077576
0.079325624
0.068339707
0.058875245
0.05072153
0.043697034
0.037645371
0.032431811
0.027940284
0.024070795
0.020737197
0.017865273
0.015391087
0.013259554
0.011423219
0.863073095
0.744895168
0.642898978
0.554868811
0.478892342
0.413319096
0.356724591
0.307879397
0.265722424
0.229337875
0.19793535
0.170832675
0.147441086
0.127252434
0.109828152
0.094789723
0.08181046
0.070608407
0.060940216
0.052595861
0.045394073
0.039178403
0.033813825
0.029183803
0.025187755
0.021738874
0.018762237
0.016193182
0.0139759
0.012062223
0.865332612
0.74880053
0.647961518
0.560702233
0.485193928
0.419854129
0.363313471
0.314386995
0.272049319
0.235413148
0.203710674
0.17627749
0.152538661
0.131996678
0.11422103
0.098839182
0.085528768
0.074010832
0.064043987
0.05541935
0.047956171
0.041498039
0.035909606
0.031073753
0.026889132
0.023268043
0.020134596
0.017423123
0.015076797
0.013046444
0.869565
0.756144
0.657516
0.571753
0.497177
0.432328
0.375937
0.326902
0.284262
0.247185
0.214943
0.186907
0.162528
0.141329
0.122894
0.106865
0.092926
0.080805
0.070265
0.0611
0.053131
0.046201
0.040174
0.034934
0.030378
0.026415
0.02297
0.019974
0.017369
0.015103
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex
Present anuity factor f anu =

1
0.995850622
2
1.987569085
3
2.975172532
4
3.958678041
5
4.938102613
6
5.913463183
7
6.884776614
8
7.852059698
9
8.81532916
10
9.774601653
11
10.72989376
Year h=
1
11.681222
2
22.79389839
3
33.36570128
4
43.42295594
5
52.99070632
6
62.09277748
7
70.75183482
8
78.98944062
9
86.82610765
10
94.28135033
11
101.3737332
12
108.1209174
13
114.5397042
14
120.6460774
15
126.4552427
16
131.9816657
17
137.239108
18
142.2406613
19
146.9987802
20
151.5253131
21
155.8315317
22
159.928159
23
163.8253963
24
167.5329482
25
171.060047
26
174.4154758
27
177.6075899
28
180.6443382
29
183.5332826
30
186.281617
(1 + ra )h 1 for r =5 %
a
(1 + ra )h ra
Trimestrial
0.330582283
0.659798509
0.987654321
1.314155342
1.639307169
1.963115379
2.285585523
2.60672313
2.926533707
3.245022738
3.562195684
Semestrial
0.164279145
0.3278836
0.490816134
0.653079508
0.81467647
0.975609756
1.135882093
1.295496195
1.454454765
1.612760496
1.770416068
Annual
0.081151853
0.161974425
0.242469052
0.322637064
0.402479787
0.481998541
0.56119464
0.640069394
0.718624106
0.796860075
0.874778595
3.878057983
7.568124294
11.07931197
14.42029227
17.59931613
20.62423451
23.50251778
26.24127418
28.84726737
31.32693316
33.68639536
35.93148091
38.06773431
40.10043128
42.03459179
43.87499247
45.6261784
47.29247431
48.87799533
50.38665706
51.82218532
53.18812531
54.48785037
55.72457031
56.90133936
58.02106368
59.08650855
60.1003052
61.06495733
61.98284725
1.927424152
3.761974208
5.508125362
7.170137167
8.752063931
10.2577646
11.69091217
13.05500266
14.35336363
15.58916229
16.76541324
17.88498583
18.95061114
19.96488866
20.93029259
21.84917796
22.72378628
23.55625107
24.34860304
25.10277505
25.82060683
26.50384945
27.15416962
27.77315371
28.36231168
28.92308072
29.45682876
29.96485784
30.44840722
30.90865649
0.952380952
1.859410431
2.723248029
3.545950504
4.329476671
5.075692067
5.786373397
6.463212759
7.107821676
7.721734929
8.306414218
8.863251636
9.393572987
9.89864094
10.37965804
10.83776956
11.27406625
11.6895869
12.08532086
12.46221034
12.82115271
13.16300258
13.48857388
13.79864179
14.09394457
14.3751853
14.64303362
14.89812726
15.14107358
15.37245103
Month n=
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Present anuity factors
f anu =

1
0.995024876
2
1.985099379
3
2.970248138
4
3.95049566
5
4.925866328
6
5.896384406
7
6.862074036
8
7.82295924
9
8.77906392
10
9.730411861
11
10.67702673
Year h=
1
11.61893207
2
22.56286622
3
32.87101624
4
42.58031778
5
51.72556075
6
60.33951394
7
68.45304244
8
76.09521825
9
83.29342446
10
90.07345333
11
96.45959872
12
102.4747432
13
108.1404398
14
113.4769898
15
118.5035147
16
123.2380253
17
127.6974861
18
131.8978761
19
135.8542459
20
139.5807717
21
143.0908062
22
146.3969265
23
149.5109789
24
152.4441214
25
155.206864
26
157.809106
27
160.2601717
28
162.5688435
29
164.7433938
30
166.7916144
(1 + ra )h 1 for
(1 + ra )h ra
ra=6%
Trimestrial
0.330038409
0.658442938
0.985221675
1.310382669
1.633933929
1.955883424
2.276239083
2.595008797
2.912200417
3.227821756
3.541880588
Semestrial
0.16381173
0.326818432
0.489024061
0.650432555
0.811047831
0.970873786
1.129914301
1.288173235
1.445654428
1.602361704
1.758298865
Annual
0.080732871
0.161074675
0.241027305
0.320592647
0.399772577
0.478568961
0.556983657
0.635018515
0.712675375
0.789956066
0.866862412
3.854384648
7.48592508
10.90750521
14.13126405
17.16863879
20.03040537
22.72671671
25.26713874
27.66068431
29.9158452
32.04062223
34.04255365
35.92874185
37.70587863
39.38026889
40.95785298
42.44422783
43.84466677
45.16413826
46.40732349
47.57863301
48.68222237
49.72200686
50.70167541
51.62470367
52.49436634
53.31374879
54.08575801
54.81313293
55.49845411
1.913469696
3.717098403
5.417191444
7.01969219
8.530202837
9.954003994
11.29607314
12.56110203
13.75351308
14.87747486
15.93691664
16.93554212
17.87684242
18.76410823
19.60044135
20.38876553
21.13183668
21.8322525
22.49246159
23.11477197
23.7013592
24.25427392
24.77544907
25.26670664
25.72976401
26.16623999
26.57766047
26.96546373
27.33100549
27.67556367
0.943396226
1.833392666
2.673011949
3.465105613
4.212363786
4.917324326
5.58238144
6.209793811
6.801692274
7.360087051
7.886874577
8.38384394
8.852682963
9.294983927
9.712248988
10.10589527
10.47725969
10.82760348
11.15811649
11.46992122
11.76407662
12.04158172
12.30337898
12.55035753
12.78335616
13.00316619
13.21053414
13.40616428
13.59072102
13.76483115
Month n=
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex
Present anuity factors f anu =

1
0.994200497
2
1.982635126
3
2.965337324
4
3.942340339
5
4.913677222
6
5.879380834
7
6.839483845
8
7.794018735
9
8.743017798
10
9.686513138
11
10.62453667
Year h=
1
11.55712014
2
22.3350993
3
32.38646445
4
41.76020141
5
50.5019935
6
58.65444427
7
66.25728507
8
73.34756869
9
79.95984996
10
86.12635414
11
91.87713399
12
97.24021619
13
102.241738
14
106.9060745
15
111.2559576
16
115.3125867
17
119.0957319
18
122.6238306
19
125.914077
20
128.9825065
21
131.8440731
22
134.5127228
23
137.0014613
24
139.3224178
25
141.4869034
26
143.5054669
27
145.3879458
28
147.1435145
29
148.7807289
30
150.3075679
(1 + ra )h 1 for r =7 %
a
(1 + ra )h ra
Trimestrial
0.329496616
0.657093292
0.982800983
1.306630581
1.628592916
1.948698755
2.266958802
2.583383701
2.897984034
3.210770321
3.521753023
Semestrial
0.163347588
0.32576129
0.487246447
0.647808366
0.807452326
0.966183575
1.124007331
1.280928783
1.436953089
1.592085378
1.74633075
Annual
0.080319368
0.160187152
0.239605891
0.31857811
0.397106318
0.475193014
0.552840678
0.630051779
0.706828772
0.783174097
0.859090182
3.83094254
7.405052966
10.73954969
13.85049677
16.7528813
19.46068565
21.98695474
24.34385897
26.54275283
28.59422955
30.50817221
32.29380129
33.95971913
35.51395135
36.96398552
38.31680723
39.57893375
40.75644542
41.85501495
42.87993474
43.83614237
44.72824441
45.5605386
46.33703455
47.06147304
47.7373441
48.36790375
48.95618974
49.50503616
50.01708709
1.899694275
3.673079209
5.32855302
6.873955537
8.316605323
9.663334335
10.92052028
12.09411681
13.18968173
14.2124033
15.16712484
16.0583676
16.89035226
17.66701885
18.39204541
19.06886547
19.70068423
20.29049381
20.84108736
21.35507234
21.83488281
22.28279102
22.70091813
23.09124425
23.45561787
23.79576454
24.1132951
24.40971327
24.68642281
24.94473412
0.934579439
1.808018168
2.624316044
3.387211256
4.100197436
4.76653966
5.389289402
5.971298506
6.515232249
7.023581541
7.498674337
7.942686297
8.357650744
8.745467985
9.107914005
9.446648603
9.763222993
10.05908691
10.33559524
10.59401425
10.83552733
11.0612405
11.27218738
11.469334
11.65358318
11.82577867
11.98670904
12.13711125
12.27767407
12.40904118
Mouth n =
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Capital recovery factor f rec =
(1 + ra )h ra or f =
ra
rec
h
h
[1 + ra ] 1
1 (1 + ra )
for ra = 17
%(constant pays for payback credit)

Month=
Monthly
Trimestrial Semestrial
Annual
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1.014166667
0.51064991
0.342822062
0.25891644
0.208579708
0.175027419
0.15106624
0.133099504
0.119129061
0.107956023
0.09881746
3.084606919
1.553002163
1.0425
0.787273482
0.63415722
0.532096083
0.4592093
0.404556486
0.362059647
0.328071988
0.30027282
6.294129544
3.168459235
2.126633333
1.605768529
1.293288158
1.085
0.936250243
0.82471198
0.737981375
0.668616124
0.611880215
13.07850567
6.58203086
4.416662815
3.334071453
2.684590756
2.251665383
1.942485898
1.710647583
1.530370037
1.38618502
1.268249103
0.091204752
0.049442264
0.035652728
0.028855042
0.024852576
0.022246131
0.020435805
0.019121454
0.018136188
0.017379765
0.016788321
0.016319229
0.015942953
0.015638383
0.015390043
0.015186341
0.015018434
0.014879473
0.014764085
0.014668005
0.014587818
0.014520767
0.014464608
0.01441751
0.014377966
0.014344733
0.014316781
0.014293256
0.014273445
0.014256753
0.277115017
0.150064932
0.108103493
0.087410223
0.075219835
0.067276311
0.061754924
0.057742755
0.054732201
0.052418389
0.05060708
0.049168638
0.048013223
0.04707663
0.046311778
0.045683393
0.04516456
0.044734422
0.044376607
0.044078112
0.043828518
0.043619402
0.043443911
0.043296434
0.043172356
0.043067862
0.042979788
0.042905503
0.042842811
0.042789877
0.564616307
0.305287893
0.219607084
0.177330653
0.152407705
0.136152858
0.124842438
0.116613544
0.110430413
0.105670974
0.101938923
0.098969755
0.096580165
0.094639136
0.093050575
0.091742466
0.090659836
0.089760062
0.089009656
0.088382006
0.087855757
0.08741363
0.087041543
0.086727952
0.08646334
0.086239828
0.086050871
0.08589101
0.08575568
0.085641059
1.17
0.630829493
0.452573681
0.364533114
0.312563864
0.278614802
0.254947243
0.237689892
0.22469051
0.214656597
0.206764792
0.200465582
0.195378139
0.191230218
0.187822095
0.18500401
0.182661569
0.180705995
0.179067452
0.177690359
0.176530035
0.175550249
0.174721405
0.17401917
0.173423428
0.17291747
0.172487362
0.17212144
0.171809915
0.171544547
Month n=
1
2
3
4
5
6
7
8
9
10
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annual constant
1.094457025
0.593307169
0.42783273
0.346260508
0.298230909
0.266953574
0.245229658
0.229457449
0.217634255
0.208557182
0.201459851
0.195830753
0.191315434
0.187660593
0.184680515
0.182236088
0.180221206
0.178553681
0.177169024
0.176016066
0.175053821
0.174249199
0.173575298
0.17301012
0.17253559
0.172136791
0.17180137
0.171519067
0.171281334
0.171081041
Annex
(1 + ra )h ra or f =
ra
rec
h
h
[1 + ra ] 1
1 (1 + ra )
for ra = 18

Month=
1
2
3
4
5
6
7
8
9
10
11
Monthly
1.015
0.511277916
0.34338296
0.259444786
0.209089323
0.175525215
0.151556165
0.133584025
0.119609823
0.108434178
0.099293844
Trimestrial
3.089559847
1.556112454
1.045
0.789471278
0.636176046
0.533997555
0.461028627
0.406315671
0.36377336
0.329750496
0.30192359
Semestrial
6.311230205
3.178276683
2.134030651
1.611961486
1.298763061
1.09
0.940914283
0.829126898
0.742205061
0.672689099
0.615831949
Annual
Month n=
13.14042789
1
6.615524278
2
4.440694326
3
3.353382779
4
2.701078582
5
2.266278049
6
1.955765311
7
1.722932433
8
1.541886114
9
1.397090374
10
1.278658678
11
0.5684689
0.308668662
0.222919783
0.180674378
0.15582009
0.139650658
0.128433173
0.12029991
0.114212291
0.109546475
0.105904993
0.103022561
0.10071536
0.098852047
0.097336351
0.096096186
0.095076597
0.09423505
0.093538198
0.092959609
0.092478142
0.092076749
0.091741596
0.091461389
0.091226868
0.091030406
0.090865703
0.090727537
0.090611571
0.090514194
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
0.091679993
0.049924102
0.036152396
0.029375
0.025393427
0.022807791
0.021017838
0.019723214
0.018756888
0.01801852
0.017444179
0.016991195
0.016630009
0.016339503
0.01610421
0.015912557
0.015755729
0.015626914
0.015520782
0.015433115
0.015360549
0.015300377
0.015250411
0.01520887
0.015174299
0.015145505
0.015121506
0.015101491
0.015084792
0.015070854
0.278743648
0.151609653
0.109666189
0.089015369
0.076876144
0.06898703
0.063520805
0.059563196
0.05660578
0.054343147
0.052580706
0.051188582
0.050076792
0.049181052
0.048454256
0.047861149
0.047374873
0.046974652
0.046644219
0.046370694
0.046143786
0.045955215
0.045798271
0.045667488
0.045558392
0.04546731
0.045391212
0.045327596
0.045274387
0.045229864
1.18
0.638715596
0.459923861
0.371738671
0.319777842
0.285910129
0.262361999
0.245244359
0.232394824
0.222514641
0.214776386
0.208627809
0.203686207
0.199678058
0.196402783
0.193710084
0.191485271
0.189639457
0.188102839
0.186819981
0.185746433
0.184846258
0.1840902
0.183454297
0.182918826
0.182467478
0.182086719
0.181765285
0.181493769
0.181264306
Annual
constant
1.100159915
0.599089224
0.433828746
0.352499995
0.304721129
0.273693493
0.252214056
0.236678569
0.225082653
0.216222239
0.209330144
0.203894343
0.199560103
0.196074038
0.193250525
0.19095068
0.189068744
0.18752297
0.186249384
0.185197383
0.184326586
0.183604527
0.183004935
0.182506444
0.182091593
0.181746063
0.181458071
0.181217898
0.181017508
0.180850245
(1 + ra )h ra or
[1 + ra ]h 1
f rec =
ra
for ra = 19
h
1 (1 + ra )

Month=
1
2
3
4
5
6
7
8
9
10
11
Monthly
1.015833333
0.511906091
0.34394416
0.259973556
0.209599482
0.17602367
0.152046864
0.134069436
0.12009159
0.108913451
0.09977146
Trimestrial
3.094510174
1.559221931
1.0475
0.791669643
0.638195911
0.535900488
0.462849808
0.408077088
0.365489669
0.331431957
0.303577662
Semestrial
6.328309504
3.188084367
2.141422477
1.618151392
1.304236622
1.095
0.945579455
0.833543949
0.746431793
0.676765973
0.619788388
Annual Month n=
13.20219505
1
6.648941801
2
4.464677053
3
3.372659418
4
2.717540614
5
2.280871211
6
1.969030023
7
1.735206453
8
1.553394613
9
1.407990967
10
1.28906599
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
0.092156578
0.050408617
0.03665602
0.029900118
0.025940551
0.023376723
0.021608019
0.020333865
0.019387083
0.018667236
0.018110326
0.017673648
0.017327625
0.017051146
0.01682876
0.016648927
0.016502875
0.016383842
0.016286553
0.016206849
0.016141427
0.016087643
0.016043371
0.016006889
0.0159768
0.015951967
0.015931458
0.015914513
0.015900506
0.015888925
0.280375925
0.15316196
0.111240186
0.090635309
0.078550467
0.070718669
0.065310162
0.061409294
0.058506804
0.056296745
0.054584176
0.053239002
0.052171114
0.051316177
0.050627095
0.050068668
0.049614128
0.04924282
0.048938617
0.048688794
0.048483225
0.048313798
0.048173972
0.048058448
0.047962916
0.047883857
0.04781839
0.04776415
0.047719192
0.047681916
0.572326969
0.312063002
0.226253283
0.184045608
0.159266152
0.143187714
0.132068092
0.124034696
0.118046104
0.113476695
0.109927844
0.107133511
0.104909399
0.103123888
0.101680584
0.100507395
0.099549449
0.098764367
0.098119009
0.097587188
0.097148033
0.096784785
0.096483903
0.096234391
0.09602728
0.095855227
0.095712205
0.095593248
0.095494263
0.095411865
1.19
0.646621005
0.467307895
0.378990938
0.327050167
0.293274292
0.269854902
0.25288506
0.240192202
0.230471309
0.2228909
0.216896022
0.212102153
0.208234563
0.205091906
0.202523448
0.200414307
0.198675594
0.19723765
0.196045291
0.195054399
0.19422943
0.193541556
0.192967267
0.192487299
0.192085808
0.191749713
0.191468188
0.191232251
0.191034434
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annual
constant
1.105878939
0.604903406
0.43987224
0.358801419
0.311286614
0.280520676
0.259296228
0.244006379
0.232644996
0.224006826
0.21732391
0.212083772
0.207931499
0.204613748
0.201945124
0.199787128
0.198034505
0.196606109
0.195438631
0.194482182
0.193697118
0.193051718
0.19252045
0.192082667
0.191721604
0.1914236
0.191177497
0.190974155
0.190806077
0.190667099
Annex
Sinking fund factors of x % f ran =
ra
for ra=16 %
(1 + ra )h 1
(payes or economised funds to reach to a certain sum in the future).

Month=
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Monthly
1
0.496688742
0.328928133
0.245055186
0.194737303
0.161196951
0.137243758
0.11928254
0.105315971
0.094145654
0.085008976
Trimestrial
3.039651381
1.509891058
1
0.745076257
0.592139438
0.490196078
0.417391836
0.36279954
0.320348539
0.286396442
0.258625363
Semestrial
6.197007374
3.078631954
2.039230485
1.5195725
1.207811904
1
0.851587343
0.740299211
0.653760758
0.584547075
0.52793322
Annual
12.85642642
6.388460575
4.232581893
3.154724996
2.508076806
0.928476691
1.769191593
1.538351763
1.358846284
1.215274842
1.097837237
0.077397525
0.035629777
0.0218237
0.015006947
0.010984724
0.008358507
0.006528731
0.005195453
0.004191917
0.003417979
0.002809839
0.00232492
0.001933711
0.001615121
0.001353674
0.00113777
0.000958549
0.000809137
0.00068413
0.000579226
0.000490972
0.000416567
0.000353726
0.000300573
0.000255556
0.000217388
0.000184999
0.000157491
0.000134114
0.000114237
0.235490045
0.108527832
0.066552173
0.045819999
0.03358175
0.025586831
0.020012975
0.01594859
0.012886878
0.010523489
0.008664544
0.007180648
0.005982124
0.005004866
0.004201845
0.003537795
0.00298578
0.002524892
0.002138687
0.001814075
0.001540535
0.001309533
0.001114098
0.0009485
0.000808
0.000688662
0.000587203
0.000500876
0.000427374
0.000364755
0.480769231
0.221920804
0.136315386
0.094014761
0.069029489
0.052695017
0.041296853
0.032976872
0.026702096
0.021852209
0.018032068
0.014977962
0.012507127
0.010488906
0.008827433
0.007450813
0.00630411
0.005344674
0.004538936
0.003860162
0.003286841
0.002801516
0.002389908
0.002040266
0.001742858
0.00148959
0.0012737
0.001089518
0.000932275
0.000797949
1
0.462962963
0.285257873
0.197375069
0.145409382
0.11138987
0.087612677
0.07022426
0.057082487
0.046901083
0.038860751
0.032414733
0.02718411
0.022897973
0.019357522
0.016413616
0.013952249
0.011884853
0.010141656
0.008667032
0.007416169
0.006352635
0.005446582
0.004673386
0.004012615
0.003447227
0.002962942
0.002547753
0.002191525
0.001885683
Month
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ra
for ra=17%
(1 + ra )h 1

Month=
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Monthly
1
0.496483244
0.328655395
0.244749773
0.194413041
0.160860752
0.136899573
0.118932837
0.104962394
0.093789356
0.084650793
Trimestrial
3.042106919
1.510502163
1
0.744773482
0.59165722
0.489596083
0.4167093
0.362056486
0.319559647
0.285571988
0.25777282
Semestrial
6.209129544
3.083459235
2.041633333
1.520768529
1.208288158
1
0.851250243
0.73971198
0.652981375
0.583616124
0.526880215
Annual
12.90850567
6.41203086
4.246662815
3.164071453
2.514590756
0.924500327
1.772485898
1.540647583
1.360370037
1.21618502
1.098249103
0.077038085
0.035275597
0.021486061
0.014688376
0.010685909
0.008079464
0.006269138
0.004954787
0.003969521
0.003213099
0.002621654
0.002152563
0.001776286
0.001471716
0.001223376
0.001019674
0.000851767
0.000712807
0.000597419
0.000501339
0.000421152
0.0003541
0.000297941
0.000250843
0.000211299
0.000178066
0.000150114
0.000126589
0.000106778
9.00868E-05
0.234615017
0.107564932
0.065603493
0.044910223
0.032719835
0.024776311
0.019254924
0.015242755
0.012232201
0.009918389
0.00810708
0.006668638
0.005513223
0.00457663
0.003811778
0.003183393
0.00266456
0.002234422
0.001876607
0.001578112
0.001328518
0.001119402
0.000943911
0.000796434
0.000672356
0.000567862
0.000479788
0.000405503
0.000342811
0.000289877
0.479616307
0.220287893
0.134607084
0.092330653
0.067407705
0.051152858
0.039842438
0.031613544
0.025430413
0.020670974
0.016938923
0.013969755
0.011580165
0.009639136
0.008050575
0.006742466
0.005659836
0.004760062
0.004009656
0.003382006
0.002855757
0.00241363
0.002041543
0.001727952
0.00146334
0.001239828
0.001050871
0.00089101
0.00075568
0.000641059
1
0.460829493
0.282573681
0.194533114
0.142563864
0.108614802
0.084947243
0.067689892
0.05469051
0.044656597
0.036764792
0.030465582
0.025378139
0.021230218
0.017822095
0.01500401
0.012661569
0.010705995
0.009067452
0.007690359
0.006530035
0.005550249
0.004721405
0.00401917
0.003423428
0.00291747
0.002487362
0.00212144
0.001809915
0.001544547
Month
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex
ra
for ra=18 %
(1 + ra )h 1

Month=
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Monthly
1
0.496277916
0.32838296
0.244444786
0.194089323
0.160525215
0.136556165
0.118584025
0.104609823
0.093434178
0.084293844
Trimestrial
3.044559847
1.511112454
1
0.744471278
0.591176046
0.488997555
0.416028627
0.361315671
0.31877336
0.284750496
0.25692359
Semestrial
6.221230205
3.088276683
2.044030651
1.521961486
1.208763061
1
0.850914283
0.739126898
0.652205061
0.582689099
0.525831949
Annual
12.96042789
6.435524278
4.260694326
3.173382779
2.521078582
0.920574618
1.775765311
1.542932433
1.361886114
1.217090374
1.098658678
0.076679993
0.034924102
0.021152396
0.014375
0.010393427
0.007807791
0.006017838
0.004723214
0.003756888
0.00301852
0.002444179
0.001991195
0.001630009
0.001339503
0.00110421
0.000912557
0.000755729
0.000626914
0.000520782
0.000433115
0.000360549
0.000300377
0.000250411
0.00020887
0.000174299
0.000145505
0.000121506
0.000101491
8.47923E-05
7.08537E-05
0.233743648
0.106609653
0.064666189
0.044015369
0.031876144
0.02398703
0.018520805
0.014563196
0.01160578
0.009343147
0.007580706
0.006188582
0.005076792
0.004181052
0.003454256
0.002861149
0.002374873
0.001974652
0.001644219
0.001370694
0.001143786
0.000955215
0.000798271
0.000667488
0.000558392
0.00046731
0.000391212
0.000327596
0.000274387
0.000229864
0.4784689
0.218668662
0.132919783
0.090674378
0.06582009
0.049650658
0.038433173
0.03029991
0.024212291
0.019546475
0.015904993
0.013022561
0.01071536
0.008852047
0.007336351
0.006096186
0.005076597
0.00423505
0.003538198
0.002959609
0.002478142
0.002076749
0.001741596
0.001461389
0.001226868
0.001030406
0.000865703
0.000727537
0.000611571
0.000514194
1
0.458715596
0.279923861
0.191738671
0.139777842
0.105910129
0.082361999
0.065244359
0.052394824
0.042514641
0.034776386
0.028627809
0.023686207
0.019678058
0.016402783
0.013710084
0.011485271
0.009639457
0.008102839
0.006819981
0.005746433
0.004846258
0.0040902
0.003454297
0.002918826
0.002467478
0.002086719
0.001765285
0.001493769
0.001264306
Month
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
ra
for ra=19 %
(1 + ra )h 1

Month=
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Monthly
1
0.496072757
0.328110827
0.244140223
0.193766148
0.160190337
0.136213531
0.118236102
0.104258257
0.093080117
0.083938126
Trimestrial
3.047010174
1.511721931
1
0.744169643
0.590695911
0.488400488
0.415349808
0.360577088
0.317989669
0.283931957
0.256077662
Semestrial
6.233309504
3.093084367
2.046422477
1.523151392
1.209236622
1
0.850579455
0.738543949
0.651431793
0.581765973
0.524788388
Annual
13.01219505
6.458941801
4.274677053
3.182659418
2.527540614
0.916698497
1.779030023
1.545206453
1.363394613
1.217990967
1.09906599
0.076323245
0.034575284
0.020822687
0.014066785
0.010107218
0.00754339
0.005774686
0.004500532
0.00355375
0.002833902
0.002276993
0.001840314
0.001494292
0.001217812
0.000995427
0.000815594
0.000669542
0.000550509
0.000453219
0.000373515
0.000308093
0.00025431
0.000210037
0.000173556
0.000143467
0.000118633
9.81248E-05
8.11796E-05
6.7173E-05
5.55916E-05
0.232875925
0.10566196
0.063740186
0.043135309
0.031050467
0.023218669
0.017810162
0.013909294
0.011006804
0.008796745
0.007084176
0.005739002
0.004671114
0.003816177
0.003127095
0.002568668
0.002114128
0.00174282
0.001438617
0.001188794
0.000983225
0.000813798
0.000673972
0.000558448
0.000462916
0.000383857
0.00031839
0.00026415
0.000219192
0.000181916
0.477326969
0.217063002
0.131253283
0.089045608
0.064266152
0.048187714
0.037068092
0.029034696
0.023046104
0.018476695
0.014927844
0.012133511
0.009909399
0.008123888
0.006680584
0.005507395
0.004549449
0.003764367
0.003119009
0.002587188
0.002148033
0.001784785
0.001483903
0.001234391
0.00102728
0.000855227
0.000712205
0.000593248
0.000494263
0.000411865
1
0.456621005
0.277307895
0.188990938
0.137050167
0.103274292
0.079854902
0.06288506
0.050192202
0.040471309
0.0328909
0.026896022
0.022102153
0.018234563
0.015091906
0.012523448
0.010414307
0.008675594
0.00723765
0.006045291
0.005054399
0.00422943
0.003541556
0.002967267
0.002487299
0.002085808
0.001749713
0.001468188
0.001232251
0.001034434
Month
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex
ra
for ra=20 %
(1 + ra )h 1

Month=
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Monthly
1
0.495867769
0.327838995
0.243836083
0.193443516
0.159856118
0.135871672
0.117889069
0.103907693
0.092727173
0.083583638
Trimestrial
3.049457911
1.512330599
1
0.743868574
0.590216813
0.487804878
0.414672839
0.359840728
0.317208565
0.283116357
0.255235021
Semestrial
6.245367587
3.097882352
2.048808848
1.524338268
1.209708849
1
0.850245752
0.737963119
0.650661551
0.580846717
0.523749498
Month
13.0638091
6.482284378
4.288611605
3.191901804
2.533977175
0.912870929
1.782280219
1.547469781
1.364895629
1.218886858
1.09947107
0.075967839
0.034229136
0.020496917
0.013763696
0.009827217
0.007286159
0.005539533
0.004286534
0.003359835
0.002658901
0.002119674
0.001699419
0.001368555
0.001105987
0.000896298
0.000727994
0.000592359
0.000482696
0.000393798
0.000321579
0.000262809
0.000214915
0.00017584
0.00014393
0.000117851
9.65247E-05
7.90757E-05
6.47932E-05
5.30986E-05
4.35202E-05
0.232011833
0.104721814
0.06282541
0.042269908
0.030242587
0.022470901
0.01712253
0.013280419
0.010434457
0.008278161
0.006616251
0.005318431
0.004294497
0.003480098
0.002828185
0.002303652
0.001879864
0.001536328
0.001257093
0.001029623
0.000843992
0.000692283
0.000568148
0.000466477
0.000383138
0.000314781
0.000258682
0.000212624
0.000174794
0.000143715
0.476190476
0.215470804
0.12960738
0.087444018
0.062745395
0.046763315
0.035746223
0.027816621
0.021930222
0.017459625
0.014005063
0.011299776
0.009159039
0.007451013
0.006079248
0.004971717
0.004073706
0.003343064
0.002746925
0.002259414
0.001859991
0.001532237
0.001262953
0.00104148
0.000859174
0.000709004
0.000585234
0.000483173
0.000398982
0.000329509
1
0.454545455
0.274725275
0.186289121
0.134379703
0.100705746
0.077423926
0.060609422
0.048079462
0.038522757
0.031103794
0.025264965
0.020620001
0.016893055
0.01388212
0.011436135
0.009440147
0.007805386
0.006462453
0.005356531
0.004443939
0.003689619
0.003065258
0.002547873
0.002118729
0.001762496
0.001466592
0.001220668
0.00101619
0.000846108
Month
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Future value of uniform series f can =

Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1 + ra )h 1
ra
for ra= 10%
Monthy
1
1
2.008333333
3.025069444
4.050278356
5.084030676
6.126397598
7.177450912
8.237263003
9.305906861
10.38345608
11.46998489
Trimestrial
0
0.330593504
0.66391931
1
1.338858342
1.680517293
2.025
2.372329801
2.722530225
3.075625
3.431638046
3.790593481
Semestrial
0
0.163296921
0.327927136
0.493901532
0.661231083
0.829926854
1
1.171461767
1.344323493
1.518596609
1.694292637
1.871423197
Annual
0
0.079741404
0.160118678
0.241136891
0.322801155
0.405116621
1.048808848
0.571721972
0.656022368
0.740994986
0.826645189
0.912978378
12.56556809
26.44691537
41.78182109
58.72249183
77.43707217
98.11131363
120.9504183
146.1810757
174.0537127
204.8449789
238.8604931
276.4378761
317.9501022
363.8092007
414.4703462
470.4363756
532.2627796
600.5632161
676.0156007
759.368836
851.4502442
953.1737792
1065.549097
1189.69158
1326.833403
1478.335767
1645.702407
1830.594523
2034.847258
2260.487925
4.152515625
8.7361159
13.79555297
19.38022483
25.54465761
32.34903798
39.85980075
48.15027751
57.30141263
67.40255354
78.55232308
90.85958243
104.4444939
119.4396944
135.99159
154.2617856
174.4286631
196.6891225
221.2605045
248.3827126
278.3205557
311.3663327
347.8426873
388.1057578
432.548654
481.6052958
535.7546493
595.5254037
661.501133
734.3259934
2.05
4.310125
6.801912813
9.549108876
12.57789254
15.91712652
19.59863199
23.65749177
28.13238467
33.0659541
38.5052144
44.50199887
51.11345376
58.40258277
66.4388475
75.29882937
85.06695938
95.83632272
107.7095458
120.7997742
135.2317511
151.1430056
168.6851637
188.0253929
209.3479957
232.8561653
258.7739222
287.3482492
318.8514448
353.5837179
1
2.1
3.31
4.641
6.1051
7.71561
9.487171
11.4358881
13.57947691
15.9374246
18.53116706
21.38428377
24.52271214
27.97498336
31.77248169
35.94972986
40.54470285
45.59917313
51.15909045
57.27499949
64.00249944
71.40274939
79.54302433
88.49732676
98.34705943
109.1817654
121.0999419
134.2099361
148.6309297
164.4940227
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex

Month n= Monthy
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1 + ra )h 1
ra
for ra= 11%
Trimestrial
1
1
2.009166667
3.027584028
4.055336881
5.092510803
6.139192152
7.19546808
8.261426537
9.337156281
10.42274688
11.51828873
Semestrial
0
0.330323621
0.663647868
1
1.339407521
1.681898185
2.0275
2.376241227
2.728150385
3.08325625
3.441587861
3.803174521
Annual
0
0.162970799
0.327402369
0.493307804
0.660700315
0.82959323
1
1.171934193
1.345409499
1.520439733
1.697038832
1.875220858
12.62387304
26.70856598
42.42312319
59.95615067
79.51807969
101.3436924
125.6949395
152.8640847
183.1772117
216.9981385
254.7327836
296.8340379
343.8072003
396.2160425
454.6895748
519.9295963
592.7191171
673.9317566
764.5422282
865.6380381
978.4325375
1104.279485
1244.689295
1401.347165
1576.133301
1771.145485
1988.724252
2231.480981
2502.329236
2804.519736
4.168045797
8.813838252
13.99213729
19.76397948
26.1973975
33.36822199
41.36097542
50.26986831
60.19990972
71.26814499
83.60503532
97.35599556
112.6831082
129.7670337
148.8091404
170.0338773
193.6914202
220.0606205
249.4522918
282.2128735
318.7285142
359.4296237
404.7959457
455.3622126
511.7244487
574.5469952
644.5703412
722.6198513
809.6154945
906.582688
2.055
4.342266375
6.888051032
9.721573
12.87535379
16.38559065
20.29257203
24.64113999
29.48120483
34.86831801
40.86430965
47.53799825
54.96598051
63.23351045
72.43547797
82.67749787
94.07712207
106.7651888
120.8873242
136.6056141
154.1004636
173.5726685
195.2457194
219.3683668
246.2174764
276.1012067
309.3625456
346.3832473
387.5882139
433.4503717
Month n=
Month n=
0
0
0.079405398
1
0.159504371
2
0.240302975
3
0.321807322
4
0.404023577
5
1.053565375
6
0.570616735
7
0.655006239
8
0.740132851
9
0.826003009
10
0.912623209
11
Year h=
1
1
2.11
2
3.3421
3
4.709731
4
6.22780141
5
7.912859565
6
9.783274117
7
11.85943427
8
14.16397204
9
16.72200896
10
19.56142995
11
22.71318724
12
26.21163784
13
30.094918
14
34.40535898
15
39.18994847
16
44.50084281
17
50.39593551
18
56.93948842
19
64.20283215
20
72.26514368
21
81.21430949
22
91.14788353
23
102.1741507
24
114.4133073
25
127.9987711
26
143.0786359
27
159.8172859
28
178.3971873
29
199.0208779
30

Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1 + ra )h 1
ra
for ra= 12%
Monthy
1
1
2.01
3.0301
4.060401
5.10100501
6.15201506
7.213535211
8.285670563
9.368527268
10.46221254
11.56683467
Trimestrial
0
0.330054468
0.663377015
1
1.339956102
1.683278326
2.03
2.380154785
2.733776675
3.0909
3.451559429
3.815789976
Semestrial
0
0.16264657
0.326880374
0.492716902
0.660171794
0.829260844
1
1.172405364
1.346493196
1.522279916
1.699782102
1.879016495
Annual
0
0.079073274
0.158896859
0.239477873
0.320823503
0.402941005
1.058300524
0.569520991
0.653998333
0.739277262
0.825365385
0.912270381
12.68250301
26.97346485
43.07687836
61.22260777
81.66966986
104.7099312
130.6722744
159.9272926
192.8925793
230.0386895
271.8958562
319.0615594
372.2090543
432.0969818
499.5801975
575.6219742
661.3077514
757.8606299
866.6588301
989.2553654
1127.40021
1283.065279
1458.472574
1656.125905
1878.846626
2129.813909
2412.610125
2731.27198
3090.348134
3494.964133
4.183627
8.892336046
14.19202956
20.1568813
26.87037449
34.42647022
42.93092252
52.50275852
63.27594427
75.40125973
89.04840911
104.408396
121.6961965
141.1537683
163.0534368
187.7017066
215.4435515
246.6672422
281.8097813
321.3630185
365.8805356
415.9853932
472.3788519
535.8501865
607.2877327
687.6913204
778.1862666
880.0391259
994.6754163
1123.699571
2.06
4.374616
6.975318538
9.897467909
13.18079494
16.8699412
21.01506593
25.67252808
30.90565255
36.7855912
43.39229028
50.81557735
59.15638272
68.52811162
79.05818622
90.88977803
104.1837546
119.1208667
135.9042058
154.7619656
175.9505446
199.7580319
226.5081246
256.5645288
290.3359046
328.2814224
370.9170062
418.8223482
472.6487904
533.1281809
1
2.12
3.3744
4.779328
6.35284736
8.115189043
10.08901173
12.29969314
14.77565631
17.54873507
20.65458328
24.13313327
28.02910926
32.39260238
37.27971466
42.75328042
48.88367407
55.74971496
63.43968075
72.05244244
81.69873554
92.5025838
104.6028939
118.1552411
133.3338701
150.3339345
169.3740066
190.6988874
214.5827539
241.3326843
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex

Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1 + ra )h 1
ra
for ra= 13%
Monthy
1
1
2.010833333
3.032617361
4.065470716
5.109513315
6.164866376
7.231652429
8.30999533
9.400020279
10.50185383
11.61562392
Trimestrial
0
0.329786043
0.663106748
1
1.340504089
1.684657717
2.0325
2.384070472
2.739409093
3.09855625
3.461552763
3.828439889
Semestrial
0
0.162324215
0.326361125
0.4921288
0.659645503
0.828929686
1
1.172875289
1.347574598
1.524117172
1.702522461
1.882810116
Annual
0
0.078744957
0.158296013
0.238661421
0.319849518
0.401868724
1.063014581
0.568434585
0.652998518
0.738428119
0.824732249
0.911919862
12.74145984
27.241655
43.74334809
62.52281082
83.8944494
108.2160683
135.8948606
167.3942253
203.2415254
244.0369174
290.4633985
343.2982421
403.4260102
471.8533634
549.725914
638.3474059
739.2015423
853.9768255
984.5948258
1133.242353
1302.408067
1494.924144
1714.013694
1963.344717
2247.09152
2570.004599
2937.490172
3355.70069
3831.637843
4373.269783
4.199259328
8.971616471
14.39528548
20.55915476
27.56424382
35.5253589
44.57297456
54.85537196
66.54106909
79.82158259
94.91456649
112.0673794
131.5611383
153.7153261
178.8930272
207.5068785
240.0258317
276.9828392
318.9835886
366.7164292
420.9636536
482.6143182
552.6788146
632.3054281
722.7991576
825.6431029
942.522771
1075.3537
1226.312854
1397.874298
2.065
4.407174625
7.063727639
10.07685648
13.49442254
17.37071141
21.76729515
26.75401034
32.41006738
38.82530867
46.10163573
54.35462778
63.71537769
74.33257427
86.37486405
100.0335302
115.5255308
133.0969451
153.0268826
175.6319159
201.2711098
230.3517245
263.3356848
300.746917
343.179672
391.3079635
445.8962748
507.8117023
578.0377281
657.6898421
1
2.13
3.4069
4.849797
6.48027061
8.322705789
10.40465754
12.75726302
15.41570722
18.41974915
21.81431654
25.65017769
29.98470079
34.8827119
40.41746444
46.67173482
53.73906035
61.72513819
70.74940616
80.94682896
92.46991672
105.4910059
120.2048367
136.8314654
155.6195559
176.8500982
200.840611
227.9498904
258.5833762
293.1992151
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1 + ra )h 1
ra
for ra= 14%
Monthy
1
1
2.011666667
3.035136111
4.070546032
5.118035736
6.177746153
7.249819858
8.33440109
9.431635769
10.54167152
11.66465769
Trimestrial
0
0.329518341
0.662837065
1
1.341051483
1.686036362
2.035
2.387988285
2.745047635
3.106225
3.471567875
3.841124302
Semestrial
0
0.162003716
0.325844597
0.491543475
0.659121423
0.828599747
1
1.173343976
1.348653718
1.525951519
1.705259922
1.886601729
Annual
0
0.078420371
0.157701708
0.237853463
0.318885192
0.400806556
1.067707825
0.567357367
0.65200667
0.737585326
0.824103537
0.911571619
12.80074536
27.51318001
44.4227995
63.85773588
86.1951251
111.8684254
141.3758284
175.2899268
214.2688255
259.0689121
310.5595345
369.7398709
437.7583189
515.9347799
605.7862722
709.0563688
827.749031
964.1674964
1120.958972
1301.166005
1508.285522
1746.336688
2019.938898
2334.401417
2695.826407
3111.227338
3588.665088
4137.404359
4768.093467
5492.970967
4.214942875
9.05168677
14.60196164
20.97102971
28.27968181
36.66652821
46.29062734
57.33450247
70.00760318
84.55027775
101.2383313
120.3882566
142.3632363
167.580031
196.5168829
229.722586
267.8268941
311.552464
361.7285612
419.3067868
485.3791251
561.198653
648.2033051
748.0431445
862.6116567
994.0816595
1144.946512
1318.067399
1516.7276
1744.69475
2.07
4.439943
7.153290741
10.25980257
13.81644796
17.88845127
22.55048786
27.88805355
33.99903251
40.99549232
49.00573916
58.17667076
68.67647036
80.69769091
94.46078632
110.2181543
128.2587648
148.9134598
172.5610202
199.635112
230.6322397
266.1208513
306.7517626
353.270093
406.5289295
467.5049714
537.3164417
617.2435941
708.7521909
813.5203834
1
2.14
3.4396
4.921144
6.61010416
8.535518742
10.73049137
13.23276016
16.08534658
19.3372951
23.04451641
27.27074871
32.08865353
37.58106503
43.84241413
50.98035211
59.11760141
68.3940656
78.96923479
91.02492766
104.7684175
120.435996
138.2970354
158.6586204
181.8708272
208.332743
238.4993271
272.8892329
312.0937255
356.786847
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Annex

Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1 + ra )h 1
ra
for ra= 15%
Monthy
1
1
2.0125
3.03765625
4.075626953
5.12657229
6.190654444
7.268037624
8.358888095
9.463374196
10.58166637
11.7139372
Trimestrial
0
0.32925136
0.662567962
1
1.341598286
1.687414261
2.0375
2.391908222
2.750692296
3.11390625
3.48160478
3.853843257
Semestrial
0
0.161685055
0.325330763
0.490960902
0.658599535
0.828271017
1
1.173811434
1.349730571
1.52778297
1.7079945
1.890391343
Annual
0
0.078099446
0.157113821
0.237053842
0.317930354
0.399754328
1.072380529
0.566289189
0.651022666
0.736748788
0.823479185
0.911225621
12.86036142
27.78808403
45.1155055
65.22838824
88.57450776
115.6736215
147.1290401
183.6410594
226.0225508
275.2170583
332.3198052
398.6020766
475.5395227
564.8450107
668.5067594
788.8326025
928.5013685
1090.62252
1278.805378
1497.239481
1750.787854
2045.095272
2386.713938
2783.249347
3243.529615
3777.802015
4397.961118
5117.813598
5953.385616
6923.279611
4.230677734
9.132554247
14.8121155
21.39274151
29.01738656
37.85168472
48.08754794
59.94733512
73.68868245
89.61010024
108.0574576
129.4314958
154.1965341
182.8905559
216.1368963
254.6577823
299.2900229
351.0031869
410.920666
480.3440779
560.781543
653.9804452
761.965392
887.0821955
1032.048832
1200.014485
1394.627959
1620.116941
1881.379844
2184.092215
2.075
4.472921875
7.244020342
10.44637101
14.1470875
18.42372799
23.36592066
29.07724206
35.67738785
43.30468134
52.11897237
62.30498744
74.07620112
87.67930991
103.3994025
121.5659345
142.5596331
166.820476
194.8569126
227.2565196
264.6983155
307.9669908
357.9693537
415.7533344
482.5299471
559.6986701
648.8767756
751.9332239
871.0278318
1008.656538
1
2.15
3.4725
4.993375
6.74238125
8.753738437
11.0667992
13.72681908
16.78584195
20.30371824
24.34927597
29.00166737
34.35191748
40.5047051
47.58041086
55.71747249
65.07509336
75.83635737
88.21181097
102.4435826
118.81012
137.631638
159.2763837
184.1678413
212.7930175
245.7119701
283.5687656
327.1040804
377.1696925
434.7451464
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
(1 + ra )h 1
ra
for ra= 16%
Monthy
1
1
2.013333333
3.040177778
4.080713481
5.135122995
6.203591301
7.286305852
8.383456597
9.495236018
10.62183916
11.76346369
Trimestrial
0
0.328985096
0.662299439
1
1.342144499
1.688791416
2.04
2.395830279
2.756343073
3.1216
3.49166349
3.866596796
Semestrial
0
0.161368212
0.3248196
0.490381057
0.658079822
0.827943487
1
1.174277669
1.350805168
1.529611541
1.710726208
1.894178966
Annual
0
0.077782112
0.156532233
0.23626241
0.316984841
0.398711873
1.077032961
0.565229907
0.650046384
0.735918412
0.822859131
0.910881838
12.92030987
28.06641183
45.82174487
66.63580331
91.03551621
119.6385871
153.1691319
192.4760104
238.5543162
292.5705686
355.8922438
430.1223946
517.1402328
619.1487034
738.7302546
878.9122151
1043.243434
1235.884123
1461.711177
1726.441638
2036.777427
2400.575011
2827.044294
3326.981781
3913.043898
4600.067404
5405.444997
6349.565632
7456.330682
8753.75903
4.246464
9.21422626
15.02580546
21.82453114
29.77807858
39.08260412
49.96758298
62.70146867
77.59831385
95.0255157
115.412877
139.263206
167.1647177
199.8055399
237.9906852
282.6619043
334.9209123
396.0565602
467.5766212
551.2449767
649.1251187
763.6310406
897.5867736
1054.296034
1237.623705
1452.091149
1702.987724
1996.501231
2339.870519
2741.56402
2.08
4.506112
7.335929037
10.63662763
14.48656247
18.97712646
24.2149203
30.32428304
37.45024374
45.7619643
55.45675516
66.76475922
79.95441515
95.33882983
113.2832111
134.2135374
158.6266701
187.102148
220.3159454
259.0565187
304.2435234
356.9496457
418.4260668
490.1321643
573.7701564
671.3255104
785.1140754
917.8370575
1072.645144
1253.213296
1
2.16
3.5056
5.066496
6.87713536
8.977477018
11.41387334
14.24009307
17.51850797
21.32146924
25.73290432
30.85016901
36.78619605
43.67198742
51.65950541
60.92502627
71.67303048
84.14071536
98.60322981
115.3797466
134.840506
157.414987
183.6013849
213.9776065
249.2140235
290.0882673
337.5023901
392.5027725
456.3032161
530.3117307
Month n=
0
1
2
3
4
5
6
7
8
9
10
11
Year h=
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
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Chapter 12
STUDY CASE
FOR SUSTAINABLE
INVESTMENT PROJECT
SELECTION
Company history
The company Mediator CSB SA is a joint stock company founded on 1st of august
2000. The domain of activity is the production of different plastic products with
resources obtained from recycling waste. Presently, the company Mediator CSB SA
has 98 employees from which:
management 7,
direct workforce 60,
indirect workforce 20,
technical and administrative workers 10,
outside consultants 1.
The main activity indicators are:
Annual turnover: 320 mld. lei (1euro = 40000 lei)
Social Capital: 120 mld. lei
Assets: 100 mld. lei
Income / Assets 1000 lei / 1400 lei
Study case no. 1
Initial data
The profit rate is 50%, and the profit structure is:
For dividends: 20%,
Net investments: 50%,
Working capital 30%,
Amortization rate is 30%,
Depreciation rate is 8 %,
Acquisition rate is 7 %,
Net investment: 5 mld. lei,
Forecasting horizon:3 years.

The problem
Determine if the society is going well or bad and if is going bad what shall we do
to solve the situation.
Problem solving
The company has three variants of project improving investments for improving its
activity. These variants are:
Indicators/Variants
Di (Dividends)
Ii (Investments)
Ci (Costs)
Vi (Incomes)
I
d1=20%
i1=50%
c1=30%
v1=1400
II
d2=20%
i2=50%
c2=30%
v2=1600
III
d3=15%
i3=60%
c3=25%
v3=1200
Table 12.1
Variant I
Forecasting
year
CFh
Vh
Ph
Dh
INh
CCh
Ah
SFh
IBh
ITh
PFh
Inet h
CFh,
h-1
100,00
140,00
46,67
9,33
23,33
14,00
30,00
8,00
53,33
58,33
37,33
21,00
29,33
2
3
129,33
167,27
181,07
234,18
60,36
78,06
12,07
15,61
30,18
39,03
18,11
23,42
38,80
50,18
10,35
13,38
68,98
89,21
92,31
119,39
48,28
62,45
44,03
56,94
37,94
49,07
Table 12.2
Forecasting
year
CFh
Vh
Ph
Dh
INh
CCh
Ah
SFh
IBh
ITh
PFh
Inet h
CFh,
h-1
100,00
160,00
53,33
10,67
26,67
16,00
30,00
8,00
56,67
61,67
39,67
22,00
31,67
131,67
210,67
70,22
14,04
35,11
21,07
39,50
10,53
74,61
101,28
52,23
49,05
41,69
173,36
277,38
92,46
18,49
46,23
27,74
52,01
13,87
98,24
133,35
68,77
64,58
54,90
Dh
INh
CCh
Ah
SFh
IBh
ITh
PFh
Table 12.3
Mathematical formula that has been used:

Forecasting
year
CFh
Vh
Ph
Inet h
CFh,
h-1
100,00
120,00
40,00
6,00
24,00
10,00
30,00
8,00
54,00
59,00
37,80
21,20
29,80
129,80
155,76
51,92
7,79
31,15
12,98
38,94
10,38
70,09
94,09
49,06
45,03
38,68
168,48
202,18
67,39
10,11
40,44
16,85
50,54
13,48
90,98
122,13
63,69
58,45
50,21
Table 12.4
Ph=Vh*p/1+p
Dh=di*Ph
INh=ii*Ph
CCh=ci*Ph
Ah=a*CFh
SFh=*CFh
IBh=INh+Ah
ITh=IBh+Ineth-1
PFh=*IBh
Ineth=ITh*PFh
CFh,h-1=PFh-SFh
where,
CFh
= Assets in year h;
Vh
= Incomes in year h;
Ph
= profit in year h;
Dh
= dividendes in year h;
INh
= Net investments in year h;
CCh
= Working Capital in year h;
Ah
= amortization in year h;
SFh
= assests that have been removed;
IBh
= Brut investments in year h;
ITh
= Total investments in year h;
PFh
= aquisitions in year h;
Ineth
= unfinished project investments in year h;
CFh,h-1 = the modification of capital assets from year h-1 to year h;
P
= profit rate:
Di
= dividends to profit ratio;
ii
= Investments to profit ratio;
ci
= Working Capital to profit ratio;
a
= amortization rate;
= coeficient for aquisitions;
= coeficient for assets replacing.
The analysis
Analysing the resulted data from table 1 we could say that the best variant is
variant II as the modification of capital assets is higher (31,67 in the first year,
41,69 in the second and 54,90 in the third) and the value of capital assets in the 3rd
year is 173,36 mld. lei.
The second selected isvariant II as the value of capital assets is 168,48 mld. lei, and
the last variant is variant III, where the capital assets is 167,27 mld. lei. As a result,
the order of project investments is: variant II, variant III and then variant I.
If we analyse the investments from the turnover point of view, the best variant is
the second because the income in the third year will be 277,38 mld. lei (in the year
1 was of 160 mld. lei, and in the second year was of 210,67 mld. lei). The second
proposed variant of investment is variant I as the income in the 3rd year is
234,18 mld. lei (in the first year the turnover was of 140 mld. lei, and in the second
year was 181,07 mld. lei). The third selected variant of investment project is
variant III where the income in the 3rd year is 202,18 mld. lei. Results that from
the point of view of forecasting, the project investments selection will be:
variant II, variant I and variant III.
From the forecasted profit perspective well note that the order of variants is
variant II, variant I and variant III. In the variant II, the profit rise from
53,33 mld. lei in year 1 to 70,22 mld. lei in year 2 and to 92,46 mld. lei in year 3. In
variant I, the profit rise from 46,67 in the first year to 60,36 in the second and to
78,06 in the third. In the variant III, the profit is 40 mld. lei in the year 1 and rise
from 51,92 mld. lei in year 2, reaching to 67,39 mld. lei in the third year.
Results that generally the second variant of project investment is the best.
The graphical reprezentation is presented in the next figures (figure 12.1):
100,00
profit
80,00
Series1
60,00
Series2
40,00
Series3
20,00
0,00
1
2
an
year
Graphic 12.1
Study case no 2
Hypotesis:
- The forecasting profit for the next three years is a medium profit;
- The income is also the forecasted medium turnover, over the next three years.
The problem
We have to find which is the optimum variant of projects starting taking into
account the following indicators:
No
1
2
3
4
5
6
7
Indicators
Production capacity
Annual turnover
Annual production costs
Annual profit
No. of employees
Management
Direct working employees
Variant
II
M.u.
units
mld. lei
mld. lei
mld. lei
No. of pers
No. of pers
No. of pers
21000
185,08
123,39
61,69
117
7
100
24000
216,01
144,01
72,00
90
7
83
III
18000
159,31
106,21
53,10
80
7
73
Table 12.5
We have to find out:

a) The required value of investments,
b) Specific investment,
c) Payback period,
d) Economic efficiency ratio,
e) Total cost of investment project,
f) Specific costs of investment project.
No.
1
2
3
4
5
6
7
8
9
10
11
Indicator
Production capacity
Annual turnover
Annual costs
Annual profit
No of employees
Management
Direct workers
Investments
From which construction works
Specific investment- product based
Specific investment-value based
M.u.
pc
mld. lei
mld. lei
mld. lei
no pers
no pers
no pers
mld. lei
mld. lei
mld. lei/unit
lei invest/ 1 leu
production
Variant
II
III
21000
185,08
123,39
61,69
117
7
100
74
44,4
3,524
24000
216,01
144,01
72,00
90
7
83
80
48
3,333
18000
159,31
106,21
53,10
80
7
73
68
40,8
3,778
0,400
0,370
0,427

Variant
No
12
13
Indicatori
Payback
Economic efficiency ratio
M.u.
years
14
Project investment useful life
15
16
Costs recalculated
Product unit based
II
III
1,20
0,83
1,11
0,90
1,28
0,78
years
20
20
20
lei/f.u.
0,00605
0,00617
0,00609
17
lei/f.u.
0,0088
0,0090
0,0089
18
19
lei/f.u.
lei
1,5000
1,5000
1,5000
2541,761 2960,198 2192,162
20
lei
222
21
lei inv/lei ch
1,030
lei profit net/ 6,3315
1 leu invest
22
Product value based
Net present value ratio
240
204
1,028
6,8355
1,032
5,9308
Table 12.6
Mathematical relation that have been used are:
Specific capital investment=Investment costs/Production capacity

Value of the capital investment=Investment costs/Annual turnover
Payback period=Investment costs/Annual profit
Efficiency ratio=1/Payback period
Specific invested capital:
- Kfh=(Ih+Ch*Def)/Def*qh
- Kfh=(Ih++Ch*Tr)/Tr*qh
- Kfh=(Ih+Ch*Tr)/Ch*Tr
Total investment project costs:
- Kvh=Ih+Ch*Def
- Kvh=Ih+Ch*Tr
- Kvh=(Ih+Ch*Def)/Ch*Def
Net Present Value ratio=(Def*Ph/Ih)-1
where,
Kfh
Kvh
Ih
Ch
Def
Tr
Qh
= Product costs unit based;

= Value costs;
= Annual investment;
= Annual production and maitenance costs;
= Investment project useful life;
= Payback period;
= Production capacity.
Economic analysis
We note that if we relate the investment project with the production capacity the
ratio must be minimum. Therefore, the variant II is the optimum investment. That
means the lowest investment costs for more products (3,333 mil lei/unit), and
lowest investments for money spent with production (an effort of 0,370 lei for 1 leu
production capacity). This situation is characteristic to the mass production. Is not
the same case for luxury goods production.
If the main indicator for investment project selection is the payback period well
note that the feasible payback period is for variant II.
From the point of view of economic efficiency, the optimum variant is the
variant II (brings the highest profit to an invested monetary unit (i.e. 1 leu) and
followed by variant I and the last variant III.
In what it concern the Net Present Value of investment ratio, variant II is the most
efficient as it brings the highest return for 1 leu invested.
As a conclusion, the variant II is the feasible variant of investment project.
Study case no 3
The company Mediator CSB SA wants to develop its activity. Therefore, it analyses
three variants of proiects:
Variant
No.
1
2
3
4
Measures
Production capacity
Annual turnover
Production costs
Useful life
Project design and constructions
5
time
6
Investment costs
year 1
year 2
Table 12.7
Measure
unit
units
mld. lei
mld. lei
year
I
21000
185,08
123,39
20
II
24000
216,01
144,01
20
III
18000
159,31
106,21
20
year
mld. lei
mld. lei
mld. lei
2
74
44
30
2
80
48
32
2
68
41
27
The criteria of the analysis will be:

1. Invested capital,
2. Opportunity costs of capital product unit based,
3. Economic efficiency,
4. Discounted Net Present Value of Investment.

We put the results of the analysis in the following table:
Variant
No.
Measures
Measure unit
I
mld. lei
59,2
II
III
64
54,4
Invested capital
Opportunity costs of capital

product unit based
17,76 19,2 16,32
Capital economic efficiency
0,24
0,24 0,24
Table 12.8
1. Invested capital
We determine the total invested capital with the formula:
Mi = Ih(d-h+1)/d, where
Ih = Investment in the year h;
d = time to perform the project design and feasibility studies;
h = the year of the analysis
M1 = 44(2-1+1)/2 + 30(2-2+1)/2 = 59,2 mld. lei
M2 = 48(2-1+1)/2 + 32(2-2+1)/2 = 64 mld. lei
M3 = 41(2-1+1)/2 + 27(2-2+1)/2 = 54,4 mld. lei
Analysing the variants of projects on invested capital base, the feasible variant is
the variant III and then I and II.
2. Opportunity costs of capital product unit based
Well use the relation:
It = Mi*a*d, where
It = total investment costs
a = discounting ratio = 15 %
It1 = 59,2*0,15*2 = 17,76 invested lei/product unit
It2 = 64*0,15*2 = 19,2 invested lei/product unit
It3 = 54,4*0,15*2 = 16,32 invested lei/product unit
Analysing the investment projects from this aspect, well observe that the variant II
will be also most feasible as it has the highest value (19,2).
3. Economic efficiency ratio

The formula is:
ei = It / Ii, where
ei = economic efficiency of 1 leu capital employed
Ii = Investments costs in variant i (i= 1-3)
e1 = 17,76 / 74 = 0,240
e2 = 19,2 / 80 = 0,240
e3 = 16,32 / 68 = 0,240
Analysing the correspondent variants for investment projects from the economic
efficiency ratio perspective, well note that the three variants presents a similar
value (0,24). what means that the result is not concludent.
4. Discounted Net Present Value of Investment
A. Discounting at the beginning of construction works, well obtain the
Discounted Net Present Value of Investment:
Ract
Iact
Pact
where,
Ract
Pact
Iact
= (Pact / Iact) 1
= Ih*1/(1+a)h
= Ph*1/(1+a)h=Ph*[1/(1+a)d]*{[(1+a)D-1]}/(1+a)d*a
= Discounted Net Present Value of Investment:
= Discounted profit
= Discounted investment
No.
1
Measure
Measure
unit
Variant
I
II
III
Discounted investment
From which:
mld.
60,99
65,94
56,05
year I
mld.
38,61
41,74
35,48
year II
mld.
22,38
24,20
20,57
Discounted profit
mld.
291,99
340,80
251,34
Discounted Net Present

Value of Investment:
3,79
4,17
3,48
Table 12.9
a) IactI=44*1/1,15+30*1/1,15=60,99 mld. lei

b) IactII=48*1/1,15+32*1/1,15=65,94 mld. lei
IactIII=41*1/1,15+27*1/1,15=56,05 mld. lei
PactI=61,69*1/1,15*(16,366-1)/16,366*0,15=291,99 mld. lei
PactII=72*1/1,15*(16,366-1)/16,366*0,15=340,80 mld. lei
PactIII=53,10*1/1,15*(16,366-1)/16,366*0,15=251,34 mld. lei
c) RactI=(291,99/60,99)-1=3,79
RactII=(340,80/65,94)-1=4,17
RactIII=(251,34/56,05)-1=3,48
B. Discounting at the investment project start-up
We use the following formulas:
Ract=(Pact/Iact)-1
Iact=Ih*(1+a)h
Pact=Ph*1/(1+a)h=Ph*[(1+a)D-1]/[(1+a)D*a]
No.
1
Measure
Variant
Measure
unit
II
III
mld. lei
81
87
74
Year 1
mld. lei
51,06
55,20
46,92
Year 2
mld. lei
30
32
27
386,16
450,70 332,40
3,79
4,17
From which:
2
3
Discounted profit
mld.
Discounted Net Present Value
of Investment:
Table 12.10
a) IactI=44*1,15+30*1,15=81 mld. lei

IactII=48*1,15+32*1,15=87 mld. lei
IactIII=41*1,15+27*1,15=74 mld. lei
3,48
b) PactI=61,69*6,259=386,16 mld. lei

PactII=72*6,259=450,70 mld. lei
PactIII=53,1*6,259=332,40 mld. lei
c) RactI=(386,16/93)-1=3,79
RactII=(450,70/100)-1=4,17
RactIII=(332,40/85)-1=3,48
Economic analysis:
As we could easy observe, Discounted Net Present Value of Investment is
changing comparing with the reference moment for discounting
(RactI-A=RactI-B=3,79; RactII-A=RactII-B=4,17; RactIII-A=RactIII-B=3,48).
C. Discounting at the investment project object out of service moment
In this case, the mathematical formula will be:
Ract=(Pact/Iact)-1
Iact=Ih(1+a)h
Pact=Ph(1+a)h
The results of the analyse are in the next table:
No.
Measure
Measure
unit
Variant
mld. lei
I
1518,14
II
1641,24
III
1395,05
Year 1
mld. lei
961,03
1038,95
883,11
Year 2
mld.lei
557,12
602,29
511,95
Discounted profit
mld.lei
7268,18
8482,91
6256,19
Discounted Net Present

Value of Investment:
3,79
4,17
3,48
From which:
Table 12.11
Investments
a) IactI=44*21,645+30*18,821=1518,14 mld. Lei
IactII=48*21,645+32*18,821=1641,24 mld. lei
IactIII=41*21,645+27*18,821=1395,05 mld. lei
Profit
b) PactI=61,69*[(16,366-1)/0,15]=7268,18 mld. lei
PactII=72*[(16,366-1)/0,15]=8482,91 mld. lei
PactIII=53,10*[(16,366-1)/0,15]=6256,19 mld. lei
Discounted Net Present Value of Investment:
c) RactI=(7268,18/1518,14)-1=3,79
RactII=(8482,91/1641,24)-1=4,17
RactIII=(6256,19/1395,05)-1=3,48
Economic analysis
Analysing the upmentioned measures, well get the conclusion that the optimum
variant is variant II as the Discounted Net Present Value of Investment is 4,17
comparing with 3,79 in variant I and 3,48 in variant III.
Study case no. 4
We want to determine if the project of Mediator CSB SA is feasible according to

banks methodologies (BRD, BCR, IBRD, EBRD, IMF, World bank etc.)
Variant
No.
1
2
3
4
5
6
7
Indicator
Investment costs
year 1
year 2
Annual turnover
Production costs
Investment object useful life
Forecasted incoms
Fixed costs
Variable costs
Measure
unit
mld. lei
mld. lei
mld. lei
mld. lei
mld. lei
year
mld. lei
mld. lei
mld. lei
II
III
74
44
30
220
123,39
20
185,08
24,15
99,24
80
48
32
210
144,01
20
216,01
23,80
120,21
68
41
27
190
106,21
20
159,31
19,89
86,32
Table 12.12
The IBRD indicators to be determined are:

1. Discounted benefits/Discounted costs
2. Net Present Value (NPV)=Discounted benefits Discounted costs
3. Internal rate of return (IRR) =amin+(amax-amin)*NPV(+)/[NPV(+)+|NPV(-)|]
4. Breakeven point=(Fixed costs/Annual Turnover-Variable Costs)*100 %

5. Discounted Cash Flow
Obtained results are in the following table:
No.
Indicator
M.u.
1
Discounted incomes
mld. lei
2
Discounted costs
mld. lei
3
d.i / d.c
mld. lei
4
NPV
mld. lei
5
IRR
6
Breakeven Point
I
1041,25
644,94
1,614
396,31
86,37%
19,99
II
993,92
747,53
1,33
246,39
60,57%
26,51
III
899,26
558,76
1,609
340,5
82,45%
19,18
Table 12.13
Discounted benefits (incomes)=Vh/(1+a)h; h=1,,22

Discounted costs=(Ih+Ch)/(1+a)h; h=1,,22
Well make a comparative analysis for the investment projects in the three variants
in order to select the most feasible one:
Variant I of investment project
Year
1
2
years
3-22
Total
Investment and
production costs
44
30
123,39
incomes
220
a=15%
0,87
0,76
4,73
Discounted
costs
38,26
22,68
584,00
Discounted
incomes
1041,25
644,94
1041,25
Table 12.14
Discounted benefits/Discounted costs =1041,25/644,94=1,614

Net Present Value (NPV)=Discounted benefits Discounted costs =1041,25644,94=396,31
Conclusion of the analysis:
The project from variant I is acceptable as is completing the requirment R>1, that
means that for an invested monetary unit of 1 leu well obtain 1,614 lei incomes,
so the firm will recover the invested capital and will work on profit.
Variant II of investment project

Year
1
2
years
3-22
Total
Investment and
production costs
48
32
144,01
Incomes
210
a=15%
0,87
0,76
4,73
Discounted
costs
41,74
24,20
681,59
Discounted
incomes
993,92
747,53
993,92
Table 12.15

Net Present Value (NPV)=Discounted benefits Discounted costs = 993,92747,53=246,39
In the second variant the project will be also acceptable as R>1, that means that
for an invested monetary unit of 1 leu well obtain 1,614 lei incomes, so the firm
will recover the invested capital and will work on profit.
Variant III of investment project
The resulted data are presented in the next table:
Investment and
Year
Incomes
a=15%
production costs
1
41
0,87
2
27
0,76
years
106,21
190
4,73
3-22
Total
Discounted
costs
35,65
20,42
502,69
Discounted
incomes
899,26
558,76
899,26
Table 12.16

Net Present Value (NPV)=Discounted benefits Discounted costs =899,26558,76=340,5
In the third variant the project will be also acceptable as R>1, that means that for
an invested monetary unit of 1 leu well obtain 1,609 lei incomes, so the firm will
recover the invested capital and will work on profit.
As a general conclusion all theree variants of investment project are acceptable, so

it will be necessary a diferentiated analysis based on IRR calculations:
Internal rate of return
(IRR) =amin+(amax-amin)*NPV(+)/[NPV(+)+|NPV(-)|]
Variant I:
Lets consider amin=85%; a max=90%
Therefore, well make the analysis first for amin=85%;
Year
1
2
years1-22
Total
Investment
and production Incomes a=85%
costs
44
0,54
30
0,29
123,39
220
0,34
Discounted Discounted
costs
incomes
23,78
8,77
42,41
74,96
75,62
75,62
Table 12.17
The condition that NPV=75,62-74,96=0,66 mld. lei >0 is fulfilled.

Than well make the same thing for a= 90 %
Year
1
2
years
3-22
Total
Investment and
production costs
44
30
123,39
Incomes
a=90%
0,53
0,28
220
0,31
Table 12.18
NPV=67,71-69,45= -1,74 mld lei <0

IRR=85%+(90%-85%)*(0,66/0,66+1,74)=0,86375
Variant II: amin= 60%; amax= 65%
For amin= 60%;
Discounted
costs
23,16
8,31
Discounte
d incomes
37,98
69,45
67,71
67,71
Year
1
2
years
3-22
Total
Investment and
production costs
48
32
144,01
Incomes
a=60%
0,63
0,39
210
0,65
Discounted
costs
30,00
12,50
Discounted
incomes
93,75
136,25
136,71
136,71
Discounted
costs
29,09
11,75
Discounted
incomes
81,38
122,22
118,66
118,66
Discounted
costs
22,16
7,89
Discounted
incomes
36,51
66,56
65,31
65,31
Discounted
costs
22,78
8,33
Discounted
incomes
0,00
0,00
40,98
72,09
73,30
73,30
Table 12.19
NPV=136,71-136,25=0,46 mld lei >0

For amax=65%
Year
1
2
years
3-22
Total
Investment and
production costs
48
32
144,01
Incomes
a=65%
0,61
0,37
210
0,57
Table 12.20
NPV=118,66-122,22= -3,56 mld lei <0

IRR=60%+(65%-60%)*(0,46/0,46+3,56)=0,6057
Variant III: amin=80%; amax=85%
Year
1
2
years
3-22
Total
Investment and
production costs
41
27
106,21
Incomes
a=85%
0,54
0,29
190
0,34
Table 12.21
NPV=65,31-66,56= -1,25 mld lei <0

Year
1
2
years
3-22
Total
Investment and
production costs
41
27
106,21
Table 12.22
Incomes
a=80%
0,56
0,31
190
0,39
NPV = 73,30 - 72,09 = 1,21 mld lei >0

IRR=80% + (85% - 80%)*(1,21/1,21 + 1,25) = 0,8245
The Breakeven point
We apply the relation:
Breakeven point=(Fixed costs/Annual Turnover-Variable Costs)*100 %
The results of the calculations are presented in the next table:
Variant
Indicators
I
II
III
Fixed Costs
24,15
23,8
19,89
Variable costs
99,24
120,21
86,32
Breakeven point
19,99834
26,50629
19,18403
Table 12.23
Conclusion for breakeven analysis:

It results that the variants of investment projects I and III are very close, because
shows that at more than 20 % from production sold, the products will be feasible.
However, as the numbers are very close to the variant II and if the variant II is a
better product quality with environmental quality embedded, preference will be
given to variant II of project investment.
The discounted cash flow
The values obtained for discounted cash flow using the formula are:
Cash flow (CF)= Vh-(Ch-Ih)
Variant I: Discounted cash flow = 125,69 mld. lei
Variant II: Discounted cash flow = 152 mld. lei
Variant III: Discounted cash flow = 113,1 mld. lei
As a conclusion, variant II of investment project is the most acceptable.

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The concept of investment

1.1 The concept of investment

Investments and risks for sustainable development

It means that only the spendings in assets (tangibles or intangibles) or services

Introduction in investments theory and practice for sustainable development

The efficiency coefficient e help us to select a variant of a project investment from

Investments and risks for sustainable development

Sustainability means the rearrangement of technological, scientific, environmental,

Introduction in investments theory and practice for sustainable development

REUSE & RECYCLING

Reuse during the production time stage

Reuse in the end-product

Figure 1.1 The various phases of a product

Investments and risks for sustainable development

Introduction in investments theory and practice for sustainable development

Investments and risks for sustainable development

Introduction in investments theory and practice for sustainable development

1.3.1 Technical and economical demands for investing in production systems

Figure 1.2 Parts of a production system (after Ad de Ron, 1994)

A sustainable production system, is a production system that will have less

Investments and risks for sustainable development

MARKET DEMAND FOR

THE CARE FOR

Figure 1.3 Making sustainable the production systems through investments

Introduction in investments theory and practice for sustainable development

Investments and risks for sustainable development

Introduction in investments theory and practice for sustainable development

Investments and risks for sustainable development

The aims of STD programm are:

Introduction in investments theory and practice for sustainable development

Summarising STD, results as:

Technology alone will not give sustainable development.

1.4 Review the literature

Investments and risks for sustainable development

Introduction in investments theory and practice for sustainable development

Investments and risks for sustainable development

Introduction in investments theory and practice for sustainable development

Measures to support investments

Measures to support investments in sustainable production

Investments and risks for sustainable development

The effective production period could be influenced by downtimes due to

Tae,i = Tp,i (Tme,i + Trm,i + Tor,i + Trj ,i )

= apparent effective production period

Qst ,i (Qme,i + Qrm,i + Qor,i + Qrj ,i )

= effectiveness of i-th machine

Measures to support investments in sustainable production

The performance for N machines (the machine performance centre) is expressed

where: Te= effective production period

Investments and risks for sustainable development

where: Te= effective production period

In the case of building machinery, the Production Cycle Efficiency is characterized

Measures to support investments in sustainable production