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.
1. Compute the net present value of the landfill
2. Calculate the landfill project's internal rate of return to the nearest whole percent.
|
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
| Unrecovered investment @beg of year |
|
|
|
|
|
|
|
|
|
|
| Cost savings during year |
|
|
|
|
|
|
|
|
|
|
| Return on unrecovered investment |
|
|
|
|
|
|
|
|
|
|
| Recovery of investment |
|
|
|
|
|
|
|
|
|
|
| Unrecovered investment at end of year |
|
|
|
|
|
|
|
|
|
|