Question: Straightforward net present value and internal rate of return The City of Bedford is studying a 600-acre site on Route 356 for a new landfill.
Straightforward net present value and internal rate of return
The City of Bedford is studying a 600-acre site on Route 356 for a new landfill. The startup cost has been calculated as follows:
Purchase cost: .........$450 per acre
Site preparation: .......$175,000
The site can be used for 20 years before it reaches capacity. Bedford, which shares a facility in Bath Township with other municipalities, estimates that the new location will save $40,000 in annual operating costs.
a. Should the landfill be acquired if Bedford desires an 8% return on its investment? Use the net-present-value method to determine your answer.
b. Compute the internal rate of return on this project.
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Step 1 Calculation of Initial investment in Year 0 Purchase cost 600 acre450 per acre 270000 Site preparation costs 175000 Total cash outflow in Year ... View full answer
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