Essay
Pittsburg Township is studying a 500-acre site for a new community park. The new site is estimated to generate $50,000 in annual operating costs for 15 years. Other data are:
Purchase price per acre: $620
Site preparation costs: $70,000
Hurdle rate: 8%
Ignore income taxes.
Required:
A. Use the net-present-value method and determine whether the site should be acquired.
B. Determine the proposal's approximate internal rate of return.
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