A firm wants to open a new coal mine. The price of coal is very volatile and the projected profits over the next five years are: BDT. 100,000, BDT 250,000, BDT 10,000, BDT 200,000 and BDT 50,000 respectively. After that profits will be a constant BDT 150,000 per year for next 20 years at which time the mine closes. If 7% is the appropriate discount rate for the first five years and is 8% after that, what is the present value of the mine?
A firm wants to open a new coal mine. The price of coal is very volatile and the projected profits over the next five years are: BDT. 100,000, BDT 250,000, BDT 10,000, BDT 200,000 and BDT 50,000 respectively. After that profits will be a constant BDT 150,000 per year for next 20 years at which time the mine closes. If 7% is the appropriate discount rate for the first five years and is 8% after that, what is the present value of the mine?
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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A firm wants to open a new coal mine. The price of coal is very volatile and the projected profits over the next five years are: BDT. 100,000, BDT 250,000, BDT 10,000, BDT 200,000 and BDT 50,000 respectively. After that profits will be a constant BDT 150,000 per year for next 20 years at which time the mine closes. If 7% is the appropriate discount rate for the first five years and is 8% after that, what is the
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