After some encouraging first signs, a mining company is evaluation setting up a gold mine in Western Australia. The mine will take 4 years to prepare and excavate, costing 4 payments of $40 million at the start of each year for the next four years, that is, at t=0, 1, 2 and 3. Once mining starts, the mine is expected to yield a constant $30 million for the next 12 years. The first payment is at t=4 and the last at t=15 The required return of the mine is 13% pa given as an effective annual nominal rate. All cash flows are real and the expected inflation rate is 2% pa given as an effective annual rate. Ignore taxes. The Net Present Value is: O a. $10.20m O b. $35.67m O c. $6.62m O d. 8.51m O e. $20.05m
After some encouraging first signs, a mining company is evaluation setting up a gold mine in Western Australia. The mine will take 4 years to prepare and excavate, costing 4 payments of $40 million at the start of each year for the next four years, that is, at t=0, 1, 2 and 3. Once mining starts, the mine is expected to yield a constant $30 million for the next 12 years. The first payment is at t=4 and the last at t=15 The required return of the mine is 13% pa given as an effective annual nominal rate. All cash flows are real and the expected inflation rate is 2% pa given as an effective annual rate. Ignore taxes. The Net Present Value is: O a. $10.20m O b. $35.67m O c. $6.62m O d. 8.51m O e. $20.05m
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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