Page 136 - The Green Building Bottom Line The Real Cost of Sustainable Building

GREEN IS THE COLOR OF MONEY 115

TABLE 4.3 GREEN, INC.’S INVESTMENT IN SUSTAINABLE
DEVELOPMENT

GREEN, INC.
# of employees 20
Annual payroll $ 2,400,000
Total assets $100,000,000
Debt $ 75,000
Equity $ 25,000,000
Gross revenues $ 12,000,000
Return on assets (ROA) 12.00%
Expenses $ 8,250,000
Net income after debt $ 3,750,000
Return on equity (ROE) $ 15.00%
Cost of capital 7.00%
Cost of green $ 1,562,667
Annual amortization $ 124,758
Revised expenses to include amortization $ 8,374,758
Revised net income to include cost of amortization $ 3,625,242
Amortization as % of revised expenses 1.49%
Revised net income after amortization 14.50%

As a values-centric company, Melaver, Inc. is comfortable paying a 50 basis point
premium for being a green developer. However, this thumbnail sketch of the costs of be-
coming a green company tells only a small part of the story, since we have considered
the expenses of going green without factoring in any of the benefits. Obvious follow-
on questions are: Has this first-cost premium been worth it? Does it pay for itself? Are
there tangible ways to justify this initial investment in green? As mentioned briefly in
Chapter 1, there are four main areas to consider when evaluating performance:

■ Short-term and more tangible cost reductions
■ Longer-term and more intangible cost reductions
■ Short-term and more tangible revenue/value creation
■ Longer-term and more intangible revenue/value creation 2
The first three areas are relatively simple to document, and I will be considering
them throughout the remainder of this chapter, focusing exclusively on the costs and
benefits of a green bottom line that concern operations. Short-term and more tangible
aspects of cost reductions include looking beyond first costs by considering the life