Show Calculations The City of Brighton is studying a 550-acre site on Route 401
ID: 2380044 • Letter: S
Question
Show Calculations
The City of Brighton is studying a 550-acre site on Route 401 for a new landfill. The startup cost has been calculated as follows:
Purchase cost: $400 per acre
Site preparation: $180,000
The site can be used for 20 years before it reaches capacity. Brighton, 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 Brighton desires an 8% return on its investment? Use the net-present-value method to determine your answer.
Explanation / Answer
he City of Brighton is studying a 550-acre site on Route 401 for a new landfill. The startup cost has been calculated as follows:
Purchase cost: $400 per acre
Site preparation: $180,000
The site can be used for 20 years before it reaches capacity. Brighton, 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 Brighton desires an 8% return on its investment? Use the net-present-value method to determine your answer.
a)40,000/1.08+40000/1.08^2+.....+40000/1.08^20-(180000)-(400*550)
=392978.51-180000-220000=-70021.49
so landfill wont be acquired
b)let rate be x
40000/(1+x)+...+40000/(1+x)^20=180000+220000=440000
1+x=1.06
x=0.06=6%