Question 8 You are becoming addicted to World of Cowcraft, a popular MMORPG. Aft

Question

Question 8

You are becoming addicted to World of Cowcraft, a popular MMORPG. After playing for a few hours, you estimate that in the next hour, you can produce 100 WoC gold. Due to your increasing skill level, you estimate that every hour thereafter your gold output will increase by 9.5% relative to the previous hour. If these estimates hold up, how much WoC gold in total can you mine in the next 50 hours of play (cumulatively for all 50 hours)? Will you ever get those hours of your life back?

Question 9

GDebi Enterprises is thinking of building a chemical processing plant to produce 4-hydroxy-3-methoxybenzaldehyde. The firm estimates that the initial cost of the project will be $10.9 million, and the plant will produce cash inflows of $7.2 million for the next 5 years, after which time the project will terminate. In the 6th year however, the firm will need to clean up the site, which it estimates will cost it $3.7 million. The discount rate the firm wants to use for the project is 12.6 percent. What is the NPV of this project? (Enter answer in millions.)

Question 10

The Blueberry Company is considering a project which will cost $374 initially. The project will not produce any cash flows for the first 3 years. Starting in year 4, the project will produce cash inflows of $460 a year for 5 years. This project is risky, so the firm has assigned it a discount rate of 18 percent. What is the net present value?

Explanation / Answer

Ans9 Year Cash Flow Discount rate @ 12.6% Discounted cash flow 0 -10.9 1 -10.9 1 7.2 0.8881 6.394 2 7.2 0.7887 5.679 3 7.2 0.7005 5.043 4 7.2 0.6221 4.479 5 7.2 0.5525 3.978 6 -3.7 0.4906 -1.8154 NPV 12.858 millions Ans 8 $100 will increase @ 9.5 for each h0ur for 50 hours Value (9.5)^50 102.3576 I have calculated this through excel formula Now 100WOC*102.3576 10235.76 Ans Yes in future the hours can be there if the setimation goes correctly. Ans 10 Year Cash Flow Discount rate @ 18% Discounted cash flow 0 -374 1 -374 1 0 0.8475 0.000 2 0 0.7182 0.000 3 0 0.6086 0.000 4 460 0.5158 237.263 5 460 0.4371 201.070 6 460 0.3704 170.399 7 460 0.3139 144.406 8 460 0.2660 122.378 NPV 501.515 Ans

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