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 $280,000 and preparatory work will cost $70,265. The landfill would be usable for 10 years. The board hired a consultant, who estimated that the new landfill would cost the county $57,000 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.
a. Calculate the landfill project’s internal rate of return to the nearest whole percent.
b. Calculate the recovery of investment and return on investment for Jefferson County’s landfill project. (Round your answers to the nearest dollar amount).
The recovery of investment and return on investment is creating in a table for 10 years, calculating the following:
Unrecovered investment at beginning of year
Cost savings during year
Return on unrecovered investment
Recovery of investment
Unrecovered investment at end of year