Question-

BP International Oil entered into a 1993 agreement with China to develop a new oil field. However, oil at the field during processing cools and creates a dangerous condition by forming plugs in the line. The only way to prevent this from happening is to add ethanol to the oil which keeps it flowing. 

The present ethanol loading and storage facility is old, with no fire protection and quickly deteriorating with holding tanks that leak. The manual level control system causes frequent tank overfills and there is no fire protection. 

The facility has been in use for 5 years. Upgrades to achieve minimum acceptable standards will cost $104,000 and extend the facility life for about 10 years. However, upgrades will not completely stop the leaks. The expected spill and leak losses will amount to $5,000 a year. The annual operating costs are expected to be $36,000.

A solution to the above is to build a new ethanol storage facility. The new facility would cost $325,000 and last about 12 years before a major upgrade is required. However, it is thought that oil technology will be advanced enough that ethanol will no longer be necessary in 10 years. The pipeline heating and insulation systems will make ethanol storage and its use obsolete. With a lower risk of leaks, spills, and evaporation loss of a more closely monitored-system, the expected annual operating cost would be $12,000.

1: The storage tanks (new and upgraded) will have no salvage value at the end of their useful lives ( considering the removal costs etc) and depreciated by the straight-line method according to China tax law. If BP Oil interest rate is 20% for foreign projects, which option is a better choice? Keep old or build new and why? 

2: How would my decision in making a presentation to the company change if I consider the risk of spills (clean-up costs) and evaporation of product related to environmental impact? Please explain this rational based on savings and or cost and why.