Fulton Township is studying a 700-acre site for a new landfill. The new site will save $70,000 in annual operating costs for 10 years, as Fulton currently uses the landfill of a neighboring municipality. Other data are:
Purchase price per acre: $550
Site preparation costs: $110,000
Hurdle rate: 6%
Ignore income taxes.

Required:
A. Use the net-present-value method and determine whether the landfill should be acquired.
B. Determine the landfill's approximate internal rate of return, using the tables above.

Question

Fulton Township is studying a 700-acre site for a new landfill. The new site will save $70,000 in annual operating costs for 10 years, as Fulton currently uses the landfill of a neighboring municipality. Other data are:
Purchase price per acre: $550
Site preparation costs: $110,000
Hurdle rate: 6%
Ignore income taxes.

Required:
A. Use the net-present-value method and determine whether the landfill should be acquired.
B. Determine the landfill's approximate internal rate of return, using the tables above.

Quizplus · Accepted Answer

The Answer of Fulton Township is studying a 700-acre site for a new landfill. The new site will save $70,000 in annual operating costs for 10 years, as Fulton currently uses the landfill of a neighboring municipality. Other data are:
Purchase price per acre: $550
Site preparation costs: $110,000
Hurdle rate: 6%
Ignore income taxes.

Required:
A. Use the net-present-value method and determine whether the landfill should be acquired.
B. Determine the landfill's approximate internal rate of return, using the tables above.

Fulton Township Is Studying a 700-Acre Site for a New