An oil and gas producing company owns 48,000 acres of land in a southeastern state. It operates 700 wells which produce 21,000 barrels of oil per year and 1.5 million cubic feet of natural gas per year. The revenue from the oil is $2,100,000 per year and for natural gas the annual revenue is $588,000 per year. What bid should be made to purchase this property if the potential buyer is hoping to make 14​% per year on his investment over a period of 12 years.

Dog Up! Franks is looking at a new sausage system with an installed cost of $695,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $93,000 at the end of the project's 5-year life. The sausage system will save the firm $199,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $51,000. If the tax rate is 23 percent and the discount rate is 8 percent, what is the NPV of this project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV Answer is complete but not entirely correct. $ 76,896.20 ☑

A firm that purchases electricity from the local utility for $300,000 per year is considering installing a steam generator at a cost of $340,000. The cost of operating this generator would be $160,000 per year, and the generator will last for five years. If the firm buys the generator, it does not need to purchase any electricity from the local utility. The cost of capital is 11%. For the local utility option, consider five years of electricity purchases. For the generator option, assume immediate installation, with purchase and operating costs in the current year and operating costs continuing for the next four years. Assume payments under both options at the start of each year (i.e., immediate, one year from now,..., four years from now). What is the net present value of the more attractive choice?

Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $53,000 to purchase, and maintenance costs would be $5,200 per year. After 10 years, Foster estimates it could sell the equipment for $25,000. If Foster leases the equipment, it would pay $15,000 each year, which would include all maintenance costs. If Foster's cost of capital is 12%, Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) Note: Use the appropriate factors from the PV tables. Multiple Choice buy the equipment, as the net present value of the cost is about $53,000 less. lease the equipment, as the net present value of the cost is about $10,400 less. buy the equipment, as the net present value of the cost is about $10,400 less. О lease the equipment, as the net present value of the cost is about $6,700 less.

You own a coal mining company and are considering opening a new mine. The mine will cost $117.1 million to open. If this money is spent immediately, the mine will generate $21.5 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.9 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 8.1%, what does the NPV rule say? Use the graph below to determine the IRR(s) in the problem. NPV ($ millions) 31- 21- NPV of the Investment in the Coal Mine 5 10 15 20 Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) A. Accept the opportunity because the IRR is greater than the cost of capital. O B. The IRR is r= 11.83%, so accept the opportunity. O C. Reject the opportunity because the IRR is lower than the 8.1%…