Question

The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 44,000 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 $14 per pickup, $25 per dump truck, and $70 per compactor truck load. The fill area is adequate for 8 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

Answer 1

The rate of return in investment = 61.6% per year

Step-by-step explanation:

The return on an investment is defined as the interest gained on an investment. Ideally, the return amount is supposed to be more than the amount invested, but if the reverse occurs, the rate of return is described as negative return. The Rate of Return on investment is the proportion of the investment amount which is the return on the originally invested amount. It is calculated in percentage as; (profit ÷ invested amount) × 100.

First, we will calculate the profit made on investment.

total landfill area = 44,000 m²

cost per m² = $8

Therefore total cost incurred (investment) = 44,000 × 8 = $352,000

Income

Pickups;

$14 per pickup load. Therefore, 2500 pickup loads

= 2500 × 14 = $35,000

dump-truck;

$25 per dump-truck load. Therefore, 650 dump-truck loads

= 650 × 25 = $16,250

Compactor-trucks;

$70 per compactor-truck load. Therefore, 1200 compactor truck loads

= 1200 × 70 = $84,000

Therefore, Total income = 35,000 + 16,250 + 84,000 = $135,250

Gain/Return on investment = Total investment - total expenditure

= 352,000 - 135,250 = $216,750

Rate of return on investment (%) = (profit ÷ invested amount) × 100.

= (216,750 ÷ 352,000) × 100 = 0.6157 × 100 = 61.6% (to one decimal place)