of gold is $6 per ounce and the price of gold is expected to increase at a rate of 5 percent per year for the fores future. What is the current value of 0.2 million ounces of gold to be produced each year for the next five years (the discount rate is 8 percent p Multiple Choice $600.00 million $521.64 million $690.86 million

of gold is $6 per ounce and the price of gold is expected to increase at a rate of 5 percent per year for the fores future. What is the current value of 0.2 million ounces of gold to be produced each year for the next five years (the discount rate is 8 percent p Multiple Choice $600.00 million $521.64 million $690.86 million

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

See similar textbooks

Similar questions

Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
An analyst has the following projected free cash flows for an investment: Year 1: $125,050; Year 2: $137,650; Year 3 to15: $150,000 a year; Year 16 to 20: $200,000 a year. The investment is expected to have a terminal value of $500,000 at the end of Year 20. If the analyst has estimated a present value of $3 millions for the investment, what is the discount rate that she/he has used in calculations. A. % 1.37 B. % 1.78 C. % 2.12 D. % 3.25
Bnn corporation is currently evaluating a project that requires an initial investment of $1,000,000 with a hurdle rate pf 5%. Below are the expected cash inflow for the next five years of the project. year 1 400,000 year 2 300,000 year 3 200,000 year 4 100,000 year 4 200,000 1. how long will it take for bnn corporation to recover its initial investment? 2. what is the NPV of the investment? Round of answers to four decimal places
Question 1) Imagine you are considering buying a gold deposit. It will cost $1 million per year to construct a mine so that gold can be extracted. The construction period lasts 3 years. In the fourth year, production starts. Each year the mine operates it will yield a net return of $500,000 (total revenue minus total cost). What will you pay for the gold deposit if: (a) Interest rates are 10 percent and gold can be extracted for 10 years? (b) Interest rates are 5 percent and gold can be extracted for 6 years?
An amount of R50000 is invested in a project that predicts the quarterly cash flow return over the next four years, given in the table below. Quarters 2 3 4 5 6 9 10 11 12 13 14 15 16 Rands 1500 3000 4500 5600 5900 6400 6600 7200 7800 8000 8100 8500 x i)If the internal rate of return for this cash flow is 21,32% p.a , then the value of the payment (rounded to the nearest cent) at T16 is equal to Blank 1. Fill in the blank, read surrounding text. ii) Using your answer from (i) and the information that the NPV = R4500, see if you can use your IRR function to solve for the bank rate. HINT: Write out the formula for the NPV and then re-arrange it to make it equal to zero. This will give a new "initial investment" value. Put it into the cash flow function and use the IRR to solve for the rate (because the equation is equal to zero). This will actually give you the bank rate. The nominal rate compounded quarterly that is offered by the bank, is equal to Blank 2. Fill in the…
You are looking to invest in a project. The expected return of 5% is used as the discount rate. The initial investment is P6 million and the project will last for five years, with the following estimated cash flows per year: P500,000; P600,000.00; P700,000.00; P300,000.00; P200,000.00 and P100,000.00 respectively.. A. Compute for Net Present Value B. How many percent is the Internal rate of Return?
Consider a project with an initial investment (today, t = 0) of $200,975. This project will generate cash flows of $49,500 per year for the next 8 years, at which time (end of Year 8) the company will pay $50,000 to another for clean-up and disposal. What is the Profitability Index (PI) of the project if shareholders demand a 16.295% return? Answer with a number rounded to three decimal places, e.g., 4.0877% should be entered as 4.088.
Question 1: Blue Bird is considering an investment of $230 000 with cash inflows of $95 000, $76 000, $71 000, $38 000 and $33 000 over the next five years respectively. Required: What is the net present value of this investment if the relevant discount rate is 12%?
Consider a project with an initial investment (today, t = 0) of $225,000. This project will generate cash flows of $68,750 per year for the next 6 years. The company will pay $50,000 to another for clean-up and disposal in Year 6. What is the Profitability Index (PI) of the project if shareholders demand 8.25% return? Answer in whole numbers, rounded to three decimal places.
2. Mathias Company estimated that it has a 20% probability of receiving $240,000 one year from now, a 30% probability of receiving $240,000 two years from now, and a 50% probability of receiving $240,000 three years from now. Required: Using the FASB's concept of "expected cash flows," calculate the present value of the expected cash flows assuming a 10% interest rate compounded annually
In one year’s time, you plan to invest a certain sum of money that will grow to R100 000 ten years after making the investment. If you can obtain a rate of return of 11% per annum, what is the present value of the investment today (rounded to the nearest Rand)? a. R31 728 b. R35 600 c. R30 000 d. R35 218 e. R33 500
Solve for the missing information pertaining to each investment proposal. Using the tables in Exhibit 26–3 determine the present value of the following cash flows, discounted at an annual rate of 15 percent. $40,000 to be received 20 years from today. $24,000 to be received annually for 10 years. $16,000 to be received annually for five years, with an additional $20,000 salvage value expected at the end of the fifth year. $30,000 to be received annually for the first three years, followed by $20,000 received annually for the next two years (total of five years in which cash is received)