The cost-benefit analysis model for evaluating potential investment in automating water bottling line segment

Abstract

This thesis has evaluated the economic viability of automating the PET bottle blowing segment within a water bottling production line. The study was done on a real-world case example from a bottling company in Bosnia and Herzegovina. It has been investigated whether replacing the two current operating semi-automated machines with one fully automated PET blowing machine would improve operational efficiency and justify the required capital investment. The analysis applies a structured cost-benefit model that incorporates actual production data into the financial indicators, Net Present Value (NPV), Benefit-Cost Ratio (BCR), Payback Period (PBP), and Internal Rate of Return (IRR) over a 10-year period. Results of the analysis show that automation would reduce labour needs from four operators to just one operator, it would lower the cost of the bottle from 0.15 BAM to 0.13 BAM, and would cut energy consumption per bottle by over 10%. The investment has been calculated to yield an NPV of 165,356 BAM and a BCR of 1.29. Furthermore, sensitivity analysis shows that even under more favourable and unfavourable conditions, the project still remains economically viable. The study concludes that investment in the automation of the PET blowing process presents an economically justified decision for the company.