Two firms propose to dispose of all of the waste currently entering the City of Columbia landfill. Each proposal is to handle the waste stream for 10 years. The current estimate is for about 220,000 tons of trash per year. Both firms’ minimum acceptable rate of return is 5 percent. Firm #1: Wants $3 million dollars up front and will bill the City at $32/ton of waste for the 10-year period. Firm #2: Wants $1.5 million up front and will bill the City at $35/ton for the first five years and $40/ton for the last five years.
Which firm would be a better deal for the City? Support your answer quantitatively.