The City of Bedford is studying a 600-acre site on Route 356 for a new landfill. The startup cost...
Question:
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 $40,000 in annual operating costs.
a) Should the landfill be acquired if Bedford desires an 8% return on its investment? Use the net-present-value method to determine your answer.
b) Compute the internal rate of return on this project.
Net Present Value:
Net present value is a technique used in capital projects evaluation. Net present value is calculated by subtracting the present value of cash outflows from the present value of cash inflows.
Answer and Explanation: 1
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View this answerComputation of the Net Present Value:
| Particulars | Amount ($) | Amount ($) |
| Initial Investment: | ||
| Purchase cost (600 acre x $450) | 270,000 | |
| Site... |
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How to Calculate Net Present Value: Definition, Formula & Analysis
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