You plan to open a gold mine at a cost of $800,000 today. In one year...
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You plan to open a gold mine at a cost of $800,000 today. In one year it will produce $1,000,000 and in two years $500,000. At the end of the third year you will shut down the project at a cost of $500,000. The rate of return that you would earn from investing in this project is closest to: Shelton Co. purchased a parcel of land six years ago for $868,500. At that time, the firm invested $140,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $51,500 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $920,000. What value should be included in the initial cost of the warehouse project for the use of this land? You plan to open a gold mine at a cost of $800,000 today. In one year it will produce $1,000,000 and in two years $500,000. At the end of the third year you will shut down the project at a cost of $500,000. The rate of return that you would earn from investing in this project is closest to: Shelton Co. purchased a parcel of land six years ago for $868,500. At that time, the firm invested $140,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $51,500 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $920,000. What value should be included in the initial cost of the warehouse project for the use of this land?
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For the first part of the question we can use the discounted cash flow DCF method to calculate the r... 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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