5. (8 pts.) In addition to the private benefits and costs of the mine in Q4c,...

 

Transcribed Image Text:

5. (8 pts.) In addition to the private benefits and costs of the mine in Q4c, suppose the monetary equivalents of real negative externalities would be $200,000 per year during the four years of construction and $100,000 per year during the subsequent 12 years of extraction. Assume that cash flows occur at the end of each year and the company can still exercise the option to shut down. a. What would be the net present value of the deposit if a government were to require the b. company to pay the real external costs and the interest rate were 10%? (Show work for 5 pts.) If the government were to require a mining company to pay the real external costs, would the company purchase the deposit and extract any phosphate from it? Briefly explain. (3 pts.) 5. (8 pts.) In addition to the private benefits and costs of the mine in Q4c, suppose the monetary equivalents of real negative externalities would be $200,000 per year during the four years of construction and $100,000 per year during the subsequent 12 years of extraction. Assume that cash flows occur at the end of each year and the company can still exercise the option to shut down. a. What would be the net present value of the deposit if a government were to require the b. company to pay the real external costs and the interest rate were 10%? (Show work for 5 pts.) If the government were to require a mining company to pay the real external costs, would the company purchase the deposit and extract any phosphate from it? Briefly explain. (3 pts.)

Answer rating: 100% (QA)

a To calculate the net present value NPV of the deposit considering the real external costs and an interest rate of 10 we need to discount the cash fl... View the full answer