•• S5.7 In a municipality where a significant amount of recyclable waste is generated, the city has granted permits to waste collectors to take charge of the recyclables and generate additional income by selling them. Now the city wants to establish an environmental waste management program where all the waste will be collected in a systematic manner. In this way it will generate sales from a number of sources, such as sale of recyclables and sale of compost. The investment needed is estimated to be

€100,000. To run the program, the city management investigates the following three alternatives:

Alternative One: City takes total responsibility for the program and no waste collectors are employed. Costs and sales are as follows:

◆ Fixed cost = €100,000

◆ Variable cost = €5,000 per month

◆ Sales generated by selling the compost = €7,000 per month Alternative Two: City takes total responsibility for the program and employs the waste collectors too. Now variable costs reduce to €2,000 per month (second job for waste collectors).

Alternative Three: City takes total responsibility for the program and employs the waste collectors too. Central government subsidizes the program contributing €1,000 per month.

For each of these alternatives, calculate the time taken (in months)

to cover the investment.