The National Capital District Commission (NCDC) is considering the purchase of a site for a new landfill. The purchase price for the site, including the related preparatory work, will cost K322,080. The landfill would be useable for 10 years. NCDC hired a consultant, who estimated that the new landfill would cost K48,000 per year less to operate than the current landfill. The current landfill will also last 10 more years. For a landfill project, NCDC can borrow money from the national government at a subsidized rate. NCDCs required rate of return is only 6 per cent for this project. It does not pay any income taxes.

Required:

a. Calculate the net present value of the new landfill. Should NCDC approve the project?

b. Calculate the internal rate of return for the landfill. Should NCDC approve the project?