(SOLVED) Waikato City Council WCC is considering the purchase of a


Question Description:

$15

Waikato City Council (WCC) is considering the purchase of a site for a new landfill. The purchase price for the site is $234000 and preparatory work will cost $88080. The landfill would be useable for 10 years. WCC hired a consultant, who estimated that the new landfill would cost $48000 per year less to operate than the current landfill. The current landfill will also last 10 more years. For a landfill project, WCC can borrow money from the government at a subsidized rate. WCC’s required rate of return is only 6 per cent for this project. It does not pay any income taxes.
Required:
Calculate the net present value of the new landfill. Should WCC approve the project?

Answer

$15