Firm Z is considering renting a small shuttered coal mine. The mine will require

Question

Firm Z is considering renting a small shuttered coal mine. The mine will require an initial cost to allow one year of mining and then a second cost to re-shutter the m hutter mine. The cash flows are as follows: Year 0: Year 1: Year 2: $293,000 $685,000 $400,000 (cost to re-open mine) (cash inflows from mine) (cost to re-shutter mine) Calculate the net present value (NPV) using the following di NPV (10% discount rate): scount rates NPV (15% discount rate): NPV (20% discount rate): NPV (25% discount rate),

Explanation / Answer

Calculation of NPV (10%,15%,20%, 25% discount rate) Year Investment Present value of $1 at 10% NPV@10% Present value of $1 at 15% NPV@15% Present value of $1 at 20% NPV@20% Present value of $1 at 25% NPV@25% 0 -293000 1 -293000 1 -293000 1 -293000 1 -293000 1 685000 0.9091 622733.5 0.8696 595676 0.8333 570810.5 0.8 548000 2 -400000 0.8264 -330560 0.7561 -302440 0.6944 -277760 0.64 -256000 NPV Cash inlows- Initial investment -826 236 51 -1000

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.