cost per ton for a solid waste incinerator

[Ericka K.]

How would I calculate the cost per ton for a 150 ton per day incinerator that costs $25 million if it is assumed that it operates at full capacity and has a lifetime of 25 years? The incinerator was financed over its lifetime at an interest rate of 5%.

 

[HallsofIvy]

How would I calculate the cost per ton for a 150 ton per day incinerator that costs $25 million if it is assumed that it operates at full capacity and has a lifetime of 25 years? The incinerator was financed over its lifetime at an interest rate of 5%.

You don't say whether it is financed at 5% simple interest or compound interest.

If the incinerator is financed at 5% simple interest, then the interest paid will be $25 million times .05 times 25= $31250000 so the total to be paid
is $25000000+ 21250000= $56250000.

If instead the incinerator is financed at 5% compound interest, the total paid will be $25 million times \(\displaystyle (1.05)^25\)= $84658873.52.

Whichever is correct, divide by the number of days in 25 years (don't forget to include leap years!) and divide by 150 to determine how much to charge for 150 tons per day.