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Jefferson Countys Board of Representatives is considering the purchase of a site for a new sanitary landfill. The purchase price

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Jefferson County’s Board of Representatives is considering the purchase of a site for a new sanitary landfill. The purchase price for the site is $234,000 and preparatory work will cost $88,080. The landfill would be usable for 10 years. The board hired a consultant, who estimated that the new landfill would cost the county $48,000 per year less to operate than the county’s current landfill. The current landfill also will last 10 more years. For a landfill project, Jefferson County can borrow money from the federal government at a subsidized rate. The county’s hurdle rate is only 6 percent for this project.

Required:
Compute the net present value of the new landfill. Should the board approve the project?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...

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Acquisition cost of site time 0 234 000 Preparatory work time 0 88 …View the full answer


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Managerial Accounting Creating Value in a Dynamic Business Environment

Managerial Accounting Creating Value in a Dynamic Business Environment

ISBN: 978-0078025662

10th edition

Authors: Ronald Hilton, David Platt

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Question Posted: April 22, 2014 03:08:39
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