Assume that a country is endowed with 8 units of oil reserve. There is no oil substitute available. How long the oil reserve will last if (a) the marginal willingness to pay for oil in each period is given by P = 8 - 0.57q, (b) the marginal cost of extraction of oil is constant at $4 per unit, and (c) discount rate is 1%?
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- Suppose the Marginal Benefit and Marginal Cost for crude oil at any given period is: MB = 159 - 2.1Q and MC=36 + 0.9Q Where price is measured in dollars and quantity is measured in barrels. The total oil reserve is 100 tons. What will be the socially efficient quantity for period 1?MansukhbhaiAn investment has an installed cost of $532,800. The cash flows over the four-year life of the investment are projected to be $216,850, $233,450, $200,110, and $148,820, respectively. a. If the discount rate is zero, what is the NPV? (Do not round intermediate calculations.) b. If the discount rate is infinite, what is the NPV? (A negative answer should be indicated by a minus sign.) c. At what discount rate is the NPV just equal to zero? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. NPV b. NPV c. IRR Q % l
- An investment has an installed cost of $537,800. The cash flows over the four-year life of the investment are projected to be $212,750, $229,350, $196,010, and $144,720, respectively. a. If the discount rate is zero, what is the NPV? (Do not round intermediate calculations.) b. If the discount rate is infinite, what is the NPV? (A negative answer should be indicated by a minus sign.) c. At what discount rate is the NPV just equal to zero? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. NPV b. NPV c. IRR %Geothermal's WACC is 11.7% . Executive Fruit's WACC is 12.3% . Now Executive Fruit is considering an investment in geothermal power production.\\na. Should it discount project cash flows at 12.3% ?\\nb. What would be a better discount rate for this investment?\\nNote: Enter your answer as a percent rounded to 1 decimal place.\\n\\\\table[[a. Should it discount project cash flows at 12.3%? ,],[b. Better discount rate,]]3. A proposal to reduce oil spill on MX5 has a B-C ratio of 1.4. The conventional annual worth of benefits minus disbenefits is P560,000. What is the first cost of the project if the interest rate is 6% per year and the project is expected to have a 20-year life?
- 12. The ABC Company is considering undertaking an investment that promises to have the following cash flows: period 0, −$50; period 1, $90. If the firm waits a year, it can invest in an alternative (that is, mutually exclusive) investment that promises to pay −$60 in period 1 and $100 in period 2. Assume a time value of money of 0.05. Which investment should the firm undertake? Use the net present value and the internal rate of return methods.Geothermal's WACC is 11.1%. Executive Fruit's WACC is 12.0%. Now Executive Fruit is considering an investment in geothermal power production. a. Should it discount project cash flows at 12.0%? Yes No b. What would be a better discount rate for this investment? (Enter your answer as a percent rounded to 1 decimal place.) Better discount rate %. Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 9 percent. Year Dry Prepreg Solvent Prepreg 0 −$ 1,770,000 −$ 785,000 1 1,107,000 410,000 2 914,000 670,000 3 757,000 404,000 . What is the payback period for both projects? b. What is the NPV for both projects? c. What is the IRR for both projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. Calculate the incremental IRR for the cash flows. b. What is the NPV for both projects? c. What is the IRR for both projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. Calculate the incremental IRR for the cash flows.
- Assume a firm buys a new machine this year at a cost of $12,600 that will lead to savings of $6,600 after one year, $4,840 more after the second year and another $4,000 after the third year. Then the machine will become obsolete and no further savings will accrue. Is this a worthwhile investment if we assume that there is no inflation and that the market rate of 4. interest remains at i = 10% over the three year period?3. The required rate of return, assuming no inflation, is 12%, the sales price of a particular product in a potential project is 6% pa and general inflation is forecast to be 8% pa for the foreseeable future. What rate should be used to discount nominal cashflows? A 18.00% B 18.72% C 20.00% D 20.96%Raysut cement has taken up a new project with an initial investment of 125000 OMR.The expected future cashflow from the project over the next three years will be 57000 OMR, 55000 OMR and 65000 OMR.What is the profitability index if the discount rate is 15 percent? Select one: O a. None of these O b. 1.07 О с. 1.23 O d. 1.12 О е. 1.04