Imagine you are considering buying a gold deposit. It will cost $1 million per year to construct a mine so that gold can be extracted. The construction period lasts 3 years. In the fourth year, production starts. Each year the mine operates it will yield a net return of $500,000 (total revenue minus total cost). What will you pay for the gold deposit if: (a) Interest rates are 10 percent and gold can be extracted for 10 years? (b) Interest rates are 5 percent and gold can be extracted for 6 years?

Q: How many years must the cash flows last for the investment to be acceptable?

A: Time value of money:   Any amount invested today earns an additional income, called interest…

Q: Suppose you invest $3,000 today and receive $10,000 in 25 years. a. What is the internal rate of…

A: IRRIt is a capital budgeting technique of a discounted cash flow that gives a rate of return is that…

Q: How much money could a fim borrow to finance a project if it is expected revenues of $240,000 yearly…

A: The time value of money states that the value of money received today will be worth more in the…

Q: You currently have $8,700 to invest. You can invest the full amount now for a period of 9 years at…

A: Final Value after 9 years = $15,000Initial Value = $8,700Number of years (n) = 9

Q: Your firm is considering investing in a project that will require an initial outlay of $10,000. You…

A: The payback period is the period in which the initial cash outflow has been recovered.It is the time…

Q: You are considering the purchase of an apartment complex that will generate net cash flows each of…

A: Amount willing to pay = [CF1/(r−g)]∗[1−[(1+g)/(1+r)]n]CF1=Cash flow in year 1 = $600,000g=Growth…

Q: You are planning to open rare earth mineral mine in Mountain Pass California. To get the mine…

A: The modified internal rate of return (MIRR) assumes that positive cash flows are reinvested at the…

Q: You are evaluating a real estate development project that requires an initial investment of $…

A: The present value of future cash flows is determined by discounting them to their current value,…

Q: What is the net present value of the flier project, which is a 3-year project where Dispersion would…

A: Part 2: Explanation:Step 1: Calculate the present value of cash flows for each project.Step 2:…

Q: on 6 (B/C Analysis):  A) Construction Project You are planning to invest your money in a new…

A: B/C ratio is ratio of present value of benefits to the initial investment of the project and is…

Q: You have been offered a unique investment opportunity. If you invest $8,800 today, you will receive…

A: Net Present Value is the present value of cash inflows less the initial investment. If NPV is…

Q: You have been offered a unique investment opportunity. If you invest ​$11,600 today, you will…

A: The computation is shown in excel table below: The formula used above is shown below:  Working…

Q: payback period c

A: Payback period is the number of years required to recover the initial cost of an investment project.

Q: Suppose you have an investment offer that guarantees an average investment gain of $1,000 per year.…

A: The average rate of change describes the rate at which one quantity changes in relation to another.…

Q: You have the chance to purchase an oil well. Your best estimate is that the oil well’s net…

A: Amount to be paid for the investment = Annual cash inflows * Present value annuity factor (5%, 5…

Q: You have been offered a unique investment opportunity. If you invest $9,500 today, you will receive…

A: Given: Initial investment = $9,500 Cash in flow in year 1 = $475 Cash in flow in year 2 = $1,425…

Q: Project A requires an original investment of $55,700. The project will yield cash flows of $16,200…

A: For a given project, the time series of the cash flows associated with it have been provided. NPV…

Q: You are evaluating a project that will cost $500,000, but is expected to produce cash flows of…

A: Cost of the project is $500,000 Annual cash flows are $125,000 Time period is 10 years Cost of…

Q: You are considering investing RM60000 in new equipment. You estimate that the net cash flows will be…

A: NPV is the net current worth of cash flows that are expected to happen in the future.

Q: You are an engineer proposing a potential investment and your company requires you to develop a…

A: Here, Initial Investment is Php 500000 Annual Revenue is Php 100000 Annual Expenses is Php70000…

Q: 1. how long will it take for bnn corporation to recover its initial investment? 2. what is the NPV…

A: Formula: Payback Period=  Completed Years+ Remaining AmountAvailable Amount Given: Initial…

Q: Your company is considering to choose one of the two projects: Project Gold and Project Diamond.…

A:

Q: Better Corporation can purchase a piece of equipment now for $120,000 or buy it 4 years from now for…

A:

Q: 1 Abusiness is considering the option of buying a piece of equipment that has a life of 5 years. The…

A: In accounting the net present value is derived by deducting the present value of associated cash…

Q: A project requires you to invest $10,000 now, will generate annual revenues of $1500 for 10 years…

A: Capital budgeting techniques are the methods that are used to evaluate various alternatives of…

Q: 8. Company ABC invests in a long-term project that will start generating cash flows 10 years from…

A: To determine whether a project is a good investment or not, we compute the net present value of the…

Q: A project requires you to invest $10,000 now, will generate annual revenues of $1500 for 10 years…

A: Present worth (PW) is a capital budgeting approach that helps in evaluating and comparing the…

Q: You are thinking about investing in a mine that will produce $8,000 worth of ore in the first year.…

A: The present value of perpetuity is the current value of the future cash flows when discounted with…

Q: You are negotiating the rights to mine a gold field for the next 30 years. The initial investment,…

A: The company generally accepts a project that offers a positive NPC because it is beneficial to the…

Q: A new diamond deposit has been found in northern Alberta. Your researchers have determined that it…

A: Initial cost (at year 0) = $4,500,000 Annual income (Year 2 - 4) = $3,000,000 Cost of capital = 21%…

Q: You invest 10000£ in a project today and you are expecting the following returns: Time Year 1 Year 2…

A: concept. NPV. Net present value (NPV) is a capital budgeting technique used for making investment…

Q: 11) What is the rate of return (IRR) of a project that will generate revenues of $40,000 at the end…

A: One financial metric used to assess an investment's profitability is the Internal Rate of Return…

Q: Your firm is considering an investment that will cost $750,000 today. The investment will produce…

A: Initial Cost = $750,000Cash Flow for year 1 = cf1 = $250,000Cash Flow for Year 2, 3 and 4 = cf =…

Q: You are offered a chance to buy an asset for $4,500 that is expected to produce cash flows of $750…

A: The internal rate of return (IRR) is a financial metric used to estimate the potential profitability…

Q: If you invest $73,300 in a project which yields an annual return of $13,500, how many years will it…

A: Given, Amount of investment is $73,300 Annual return $13,500. Rate of interest is 4.5%.

Q: Suppose you are offered an investment opportunity that will pay $2,500 in five years if you invest…

A: We need to use equation below to calculate the annual rate of return of investment.WhereFVn = future…

Q: i) Estimate the net present value of this project. ii) Estimate the internal rate of return of this…

A: Information Provided: Term = 30 year Depreciation = 500,000 Tax rate = 40% Initial Investment =…

Q: c) Consider this question: XYZ Company can borrow money at an interest rate of 10 % ( that's their…

A: To evaluate the project , we have to calculate the NPV of the project.If the NPV is positive, then…

Q: You plan to buy some undeveloped land that should sell for $180,000 in three years. What is the most…

A: Present Value: The term present value is defined as the current or present day’s value of the amount…

Q: . Consider the problem of investing in a risky project. A project costs $500. The annual cash flow…

A: Option a: This option is incorrect because the value is too high considering the initial investment…

Q: You are considering investing in a new gold mine in South Africa. The mine will require an initial…

A: The IRR is the investment discount rate that corresponds to the difference between the original…

Q: Company ABC invests in a long-term project that will start generating cash flows 10 years from now…

A: Annual cash flow (C) = $22,000,000Growth rate (g) = 0.02Interest rate (r) = 0.05Initial cost (I) =…

Q: Big​ Steve's, makers of swizzle​ sticks, is considering the purchase of a new plastic stamping…

A: Capital budgeting is the act of analyzing and evaluating a project's profitability and deciding…

Q: You have been offered a unique investment opportunity. If you invest $8,900 ​today, you will receive…

A: Net present value (NPV) is the difference between present value of cash inflows and present value of…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.