Consider this proposal to open a gold mine. The size and timing of the cash flows...
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Consider this proposal to open a gold mine. The size and timing of the cash flows are shown below: Year 0 -$800,000 Year 1 $500,000 Year 2 $1,000,000 Year 3 -$500,000 Opening the mine costs $800,000. In one year we make $500,000, the year after that we make a million dollars and in year three we have to shut down the mine and pay land reclamation costs of half a million dollars. If we undertake this investment at a cost of capital of 15% what is the NPV to the penny? The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $297,000 and reduce expenses by $200,000. The project will require $100,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 10-year life of the project. The company has a marginal tax rate of 20 percent. What is the annual depreciation tax shield? You own the following portfolio of stocks. The portfolio weight of Stock C is closest to: StockNumber of Shares Price per Share $ 29 A B C D 120 720 450 220 $25 $49 $ 48 Three months ago, you purchased a stock for $59.72. The stock is currently priced at $63.90. The EAR on your investment is closest to: Consider this proposal to open a gold mine. The size and timing of the cash flows are shown below: Year 0 -$800,000 Year 1 $500,000 Year 2 $1,000,000 Year 3 -$500,000 Opening the mine costs $800,000. In one year we make $500,000, the year after that we make a million dollars and in year three we have to shut down the mine and pay land reclamation costs of half a million dollars. If we undertake this investment at a cost of capital of 15% what is the NPV to the penny? The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $297,000 and reduce expenses by $200,000. The project will require $100,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 10-year life of the project. The company has a marginal tax rate of 20 percent. What is the annual depreciation tax shield? You own the following portfolio of stocks. The portfolio weight of Stock C is closest to: StockNumber of Shares Price per Share $ 29 A B C D 120 720 450 220 $25 $49 $ 48 Three months ago, you purchased a stock for $59.72. The stock is currently priced at $63.90. The EAR on your investment is closest to:
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Answer rating: 100% (QA)
Net Present Value NPV Calculation for Gold Mine Investment NPV 800000 500000115 10000001152 50000011... View the full answer
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
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