Question

The city needs a new site for a garbage landfill. When the landfill is closed, the city wants to minimize future environmental problems by ensuring that at least 10 feet of dirt cover the garbage. Then the area would need to be planted with meadow grasses and a variety of trees. Information about a potential landfill follows.
Initial investment ......... $3,000,000
Expected annual cash flows .... $378,092
Cleanup costs ......... ???
Project life ........... 10 years
Required rate of return ....... 8%

REQUIRED
Calculate the maximum amount that the city could pay for cleanup costs and still earn the required rate of return on the landfill, ignoring taxes and inflation.



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  • CreatedJanuary 26, 2015
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