Question

The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 50,000 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 $10 per pickup, $25 per dump truck, and $70 per compactor truck load. The fill area is adequate for 4 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 landfill 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 = 50000 x $8 = $400,000

Revenue earned by pickup loads per annum = 2500 x $10 = $25,000

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 = 25,000 + 16,250 + 84,000 = $125,250

Total revenue earned in 4 years = $125,250 x 4 = $501,000

Now, the total return after 4 years = $501,000 - $400,000 = $101,000

Percentage return (4 years) = (101,000 / 400,000) x 100 = 25.25%

Therefore, annual rate of return = 25.25% / 4

Annual rate of return = 6.31%