Refer to the data given in Exercise 21.21. In E21-21 Waikato City Council (WCC) is considering the

Question:

Refer to the data given in Exercise 21.21.

In E21-21

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 internal rate of return for the landfill project. Should WCC approve the project?

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...