ACC 206 Week 5 Problem 3 Net present value.

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Net present value

The City of Bedford 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. Bedford, 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 Bedford desires an 8% return on its investment? Use the net-present-value method to determine your answer.