MBAX 6990 Week 7 Capstone Financial Section Example

Pricing Quarry Hill's Sequenced Plan: A Simple Payback for Rinse-Water Recovery, a Net Present Value for Returnable Bottles and the Number of Trips Each Bottle Must Make to Break Even

Student Name

Walden University

MBAX 6990: Capstone: Sustainable Business Practice and Strategies

Instructor Name

Month Day, Year

Pricing Quarry Hill's Sequenced Plan: A Simple Payback for Rinse-Water Recovery, a Net Present Value for Returnable Bottles and the Number of Trips Each Bottle Must Make to Break Even

The Recommendation, Repeated Exactly

The strategy section's recommendation, restated here without change, is to recover rinse water first, run a returnable bottle pilot next and grow the bottle program only when returns clear the implementation plan's threshold. This financial section prices that plan for Quarry Hill Brewing, the capstone's composite craft brewery in western Massachusetts, using its most recent year as the baseline. All figures are illustrative, built from published industry ranges.

Payback for the Small Project

Rinse-water recovery is small and quick, so a simple payback period answers the owners' first question: how soon does the money come back? The system costs about $150,000 installed. It would reuse about a quarter of the brewery's water, roughly 1.2 million gallons a year, avoiding both the purchase charge and the sewer charge with its strength surcharge, together about $30 per thousand gallons. Including a modest increase in maintenance, net savings are about $45,000 a year. The investment pays back in a little over three years. Payback leaves out discounting and every dollar saved after the cost is recovered, so it understates this project, yet owners of a small firm reach for it first when the sums are modest and the savings predictable (Brealey et al., 2020).

Discounting the Bottle Program

The returnable bottle program is larger, longer-lived and more uncertain, so it is valued by net present value across a decade, discounted at 8 percent to cover the brewery's cost of borrowing and some added risk. The program would cover the roughly 60 percent of bottles sold in Massachusetts, Vermont and the taproom, about 3.3 million fills a year, where deposit systems or direct sales make returns practical. New Hampshire sales would stay in single-use glass.

At ten trips per bottle, each fill saves about $0.13, or about $433,000 a year across 3.3 million fills. Against a capital cost of about $1.1 million for a washer and line changes, the ten-year net present value is about $1.8 million.

Table 1

Cost per Fill, Single-Use Versus Returnable, Illustrative

Composite organization; unit costs illustrative.

The Number That Decides It

That result depends almost entirely on one variable: how many trips each bottle makes before it breaks, is lost or is not returned. The table below shows how the net present value changes.

The program breaks even at a little over four trips per bottle. Below that, it loses money; above it, its value rises quickly. This is why the strategy recommends a pilot: the brewery does not know its return rate, and the pilot's job is to show whether bottles make more than about five trips in practice. Bottle reuse programs in markets with established deposit systems commonly achieve far more trips than that, but Quarry Hill's brand and distributors are untested. The environmental case moves in the same direction: the more trips, the lower the footprint per fill (Amienyo et al., 2013).

Table 2

Net Present Value of the Bottle Program by Average Trips per Bottle, Illustrative

Composite organization; illustrative.

Water Counted Both Ways

A classmate pointed out that the bottle washer uses water the recovery project saves. At full program scale the washer would use roughly 260,000 gallons a year, about $8,000 at current charges, already included in the washing cost per fill. That is less than a quarter of the 1.2 million gallons rinse recovery saves, so the combined plan still lowers total water use. Here, then, each project's water is netted against the other's.

What the Pilot Costs

The pilot does not require the full $1.1 million. It can run in the taproom and about forty home-state accounts using a smaller used washer leased for two years, roughly $90,000 including bottle stock and labels, handling perhaps 300,000 fills a year. At that scale its savings are small, but its purpose is to measure trips per bottle, breakage and the time distributors spend handling empties. If the pilot shows six or more trips, the full program's expected value is strongly positive; if it shows four or fewer, the brewery can stop with a modest loss and consider cans instead.

Financing and Conclusion

The rinse-water project can be paid from cash. The bottle program's capital would require a loan or equipment lease, which the implementation plan addresses. Financially, the sequence makes sense: a certain, quick project first, whose savings help fund a pilot that resolves the single uncertainty, return rates, on which the larger investment depends. Hart (1995) argued that environmental strategies create value when they lower costs, and both projects do, provided bottles come back often enough.

References

Amienyo, D., Gujba, H., Stichnothe, H., & Azapagic, A. (2013). Life cycle environmental impacts of carbonated soft drinks. International Journal of Life Cycle Assessment, 18(1), 77-92. https://doi.org/10.1007/s11367-012-0459-y

Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw Hill.

Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986-1014. https://doi.org/10.2307/258963