Question

The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 48,000 m2 and the installed liner cost was $8 per m2. In order to recover the investment, the owner charges to unload at the rates of $18 per pickup. $25 per dump truck, and $70 per compactor truck load. The fill area is adequate for 5 years. If the annual traffic is estimated to be 2500 pickup loads, 650 dump-truck loads, and 1200 compactor-truck loads, what rate of return will the landfil owner make on the investment? The rate of return that will be made by the landfill owner is % per year.

Answer 1

Total investment of the Landfill = 48000 x $8 = $384,000

Revenue earned by pickup loads per annum = 2500 x $18 = $45,000

Revenue earned by dump truck loads per annum = 650 x $25 = $16,250

Revenue earned by compractor truck loads annum = 1200 x $70 = $84,000

Thus, total revenue earned per annum = 45,000 + 16,250 + 84,000 = $145,250

Total revenue earned in 5 years = $145,250 x 5 = $726,250

Now, the total return after 5 years = $726,250 - $384,000 = $342,250

Percentage return (4 years) = (342,250 / 384,000) x 100 = 89.13%

Therefore, annual rate of return = 89.13% / 5

Annual rate of return = 17.83%