QUESTION 2 Given below in table 1 are hypothetical data on costs and benefits of a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
QUESTION 2 Given below in table 1 are hypothetical data on costs and benefits of a proposed small mine to be constructed in remote Telefomin district in Sundaun Province. Table 1: Summary of total costs and benefits (K millions) Year 0 1 23 4 5 6 7 450 360 600 540 500 615 Costs 980 750 Benefits 0 290 350 400 450 345 689 990 8 250 2000 Undertake the following: (a) Calculate the NPV, IRR and BCR (use 8% discount rate). Interpret the results. (b) Conduct a sensitivity analysis by reducing the life of the project to 6 years and recalculate the NPV, IRR and BCR (use 10% discount rate). Interpret the results and contrast to (a) above. (c) The above costs and benefits are based on market prices. Explain how you would incorporate externalities or costs and benefits associated with environmental consequences by employing non-market valuation techniques. (d) Calculate the cost effectiveness (CE) ratio if the total impact of the project is valued at K10 billion. Interpret. 0 QUESTION 2 Given below in table 1 are hypothetical data on costs and benefits of a proposed small mine to be constructed in remote Telefomin district in Sundaun Province. Table 1: Summary of total costs and benefits (K millions) Year 0 1 23 4 5 6 7 450 360 600 540 500 615 Costs 980 750 Benefits 0 290 350 400 450 345 689 990 8 250 2000 Undertake the following: (a) Calculate the NPV, IRR and BCR (use 8% discount rate). Interpret the results. (b) Conduct a sensitivity analysis by reducing the life of the project to 6 years and recalculate the NPV, IRR and BCR (use 10% discount rate). Interpret the results and contrast to (a) above. (c) The above costs and benefits are based on market prices. Explain how you would incorporate externalities or costs and benefits associated with environmental consequences by employing non-market valuation techniques. (d) Calculate the cost effectiveness (CE) ratio if the total impact of the project is valued at K10 billion. Interpret. 0
Expert Answer:
Answer rating: 100% (QA)
a Discount Rate NPV IRR BCR b Discount Rate NPV IRR C BCR d CE Ratio 1016 O C There are many factors ... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
How does a firms top management influence its degree of centralization?
-
Discuss at least 10 common features of project management software systems. In your opinion, which of these are the most important?
-
1. What is the gross pay for Anthony V. Bonno? 2. What is the amount of OASDI withheld for Catherine L. Ford? 3. What is the total net pay for all employees?. 4. What is the total amount of group...
-
Discuss types of media used in the design of a network given different situations. Namely: What would you do for a college campus with hundreds of staff users and students? How would they connect...
-
Last year the city of Goose Pimple, Vermont, paid an average of $3,261 per employee in health care costs (including insurance and additional claims). This year the city management decided that they...
-
Youre looking at some corporate bonds issued by Mazda, and you are trying to determine what the nominal interest rate should be on them. You have determined that the real risk-free interest rate is...
-
How to draft a settlement agreement?
-
On January 1, 2013, Lacey Tree toppers borrowed $300,000, which is to be paid back in annual installments of $20,000 on December 30 of each year. a. Assuming that Lacey has met all payments on a...
-
Organisations are greatly affected by the global environment, which refers to the external Australian environment and international factors that influence organisational decision-making. Identify the...
-
(a) What payment should Maria make on the account? (b) How should she notify her credit card issuer about the unauthorized use? (c) Once the matter is resolved, what should Maria do to ensure that...
-
Steven and Sally Smith are spouse and they have two children, Jamila aged 15 and Nic aged 12, both of whom will be dependent until age 18. Steven and Sally are not sure what would be the cost of...
-
Describe the supply chain of your company. What role does your company play in the supply chain?
-
Give as many reasons as you can why we believe that indifference curves are convex and explain.
-
Suppose that consumers in Bangladesh pay twice as much per unit for mangoes as they pay for bananas, whereas consumers in Indonesia pay half as much for mangoes as they pay for bananas. Assuming that...
-
The Wall Street Journal, a newspaper based in the United States, publishes an index of Starbucks coffee prices in various cities around the world. Would people find this index to be as useful as the...
-
In the long run, a firm can usually substitute one input for another while continuing to produce the same level of output. If such a firm produces a given level of output using the same amount of...
-
Please answer the following question referring to an Oracle Database. What is the process of name resolution? Describe the four methods of name resolution available (and the required configuration...
-
Suppose the market is semistrong form efficient. Can you expect to earn excess returns if you make trades based on? a. Your brokers information about record earnings for a stock? b. Rumors about a...
-
Describe supplier certification and explain why it can be important.
-
Under what circumstances is expected monetary value appropriate as a decision criterion? When isnt it appropriate?
-
A machine cell uses 200 pounds of a certain material each day. Material is transported in vats that hold 20 pounds each. Cycle time for the vats is about two hours. The manager has assigned an...
-
Prove that (a) \(\left(\frac{\partial C_{P}}{\partial P} ight)_{T}=-T\left(\frac{\partial^{2} V}{\partial T^{2}} ight)_{P}\) (b) \(\left(\frac{\partial C_{V}}{\partial V}...
-
A gas obeys the equation of state \(V=\frac{R T}{P}-\frac{C}{T^{2}}+\frac{D}{T^{3}}\). Find out the variation \(C_{P}\) at constant temperature.
-
Deduce two \(T d S\) equations and mention why \(T d S\) equations are so useful.
Study smarter with the SolutionInn App