6 9 10 11 Question 1 (30 points): Consider an escalation rate of 10% for all costs (including environmental remediation cost) and 7% for all incomes (including salvage value) for a project. At the end of 11th year, the project a salvage value of $7,000 and an environmental remediation cost of $12,000. 0 1 2 3 4 5 7 8 -50,000 -16,000 0 14,000 12,000 10,000 10,000 9,000 9,000 8,000 8,000 7,000 7,000 6,000 a) Calculate the escalated-dollar cash flow b) Calculate the escalated-dollar IRR c) Calculate the escalated-dollar NPV, using an escalated-dollar minimum rate of return of 11%. Year Cost Income 0 0 0 0 0 0 0 0 0 0 Question 2 (30 points): Same as question 1, but now consider an inflation rate of 5%: a) Calculate the constant-dollar cash flow b) Calculate the constant-dollar IRR c) Calculate the constant-dollar NPV (hint: one needs to calculate constant-dollar min ROR using Fisher's rule). 6 9 10 11 Question 1 (30 points): Consider an escalation rate of 10% for all costs (including environmental remediation cost) and 7% for all incomes (including salvage value) for a project. At the end of 11th year, the project a salvage value of $7,000 and an environmental remediation cost of $12,000. 0 1 2 3 4 5 7 8 -50,000 -16,000 0 14,000 12,000 10,000 10,000 9,000 9,000 8,000 8,000 7,000 7,000 6,000 a) Calculate the escalated-dollar cash flow b) Calculate the escalated-dollar IRR c) Calculate the escalated-dollar NPV, using an escalated-dollar minimum rate of return of 11%. Year Cost Income 0 0 0 0 0 0 0 0 0 0 Question 2 (30 points): Same as question 1, but now consider an inflation rate of 5%: a) Calculate the constant-dollar cash flow b) Calculate the constant-dollar IRR c) Calculate the constant-dollar NPV (hint: one needs to calculate constant-dollar min ROR using Fisher's rule)