A mine is for sale. A mining engineer estimates that, at the current production levels, the mine will yield an annual net income of $100,000 for 20 years, after which the mineral will be exhausted. If an investor’s minimum acceptable rate of return is 10%, what is the maximum amount that this engineer can bid on this property, to remain profitable?
A mine is for sale. A mining engineer estimates that, at the current production levels, the mine will yield an annual net income of $100,000 for 20 years, after which the mineral will be exhausted. If an investor’s minimum acceptable rate of return is 10%, what is the maximum amount that this engineer can bid on this property, to remain profitable?
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 mine is for sale. A mining engineer estimates that, at the current production levels, the mine will
yield an annual net income of $100,000 for 20 years, after which the mineral will be exhausted. If an
investor’s minimum acceptable rate of return is 10%, what is the maximum amount that this
engineer can bid on this property, to remain profitable?
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