Royal Dutch Shell PLC (ticker: RDS) is a large, multinational oil company. The firm is preparing to purchase a semi-submersible oil production platform for $17 million. Additionally, it is going to cost $1.6 million to move the platform to the Mars oil-field and secure it in location. While preparing the oil field for production an additional $2.7 million dollars will be spent on research, geological surveys, and training. If this acquisition is going to be fully depreciated over 5 years using straight-line depreciation, what are the yearly depreciation expenses in this case? O A. $3.94 million O B. $3.40 million O C. $3.72 million O D. $4.26 million

Royal Dutch Shell PLC (ticker: RDS) is a large, multinational oil company. The firm is preparing to purchase a semi-submersible oil production platform for $17 million. Additionally, it is going to cost $1.6 million to move the platform to the Mars oil-field and secure it in location. While preparing the oil field for production an additional $2.7 million dollars will be spent on research, geological surveys, and training. If this acquisition is going to be fully depreciated over 5 years using straight-line depreciation, what are the yearly depreciation expenses in this case? O A. $3.94 million O B. $3.40 million O C. $3.72 million O D. $4.26 million

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

See similar textbooks

Similar questions

Highland Mining and Minerals Company is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,648,000 and will produce $338,000 per year in years 5 through 15 and $533,000 per year in years 16 through 25. The U.S. gold mine will cost $2,035,000 and will produce $275,000 per year for the next 25 years. The cost of capital is 12 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. Note: Do not round intermediate calculations and round your answers to 2 decimal places. The Australian mine The U.S. mine Net Present Value a-2. Which…
On January 2, 2021, an Australian Copper Exploration Company was investigating the feasibility of two mutually exclusive investment projects. The first prospective investment involved a strip (open-cut) mining operation in South Wales. The second investment also involved the extraction of copper, but this expenditure would be an underground site in Queensland. Preliminary drilling, sampling and analysis of both sites and consultation with geologists, costing the company $3600,000, suggested that both sites have similar copper reserves and useful lives. The copper extraction process for the two types of mines and the equipment required for operation of the mines are very different, however, with the underground mining operation expected to be more complex and difficult. The process of drilling underground also increases the dangers faced by employees, although it is more environmentally friendly than the pollution and soil erosion caused by open-cut mining operations. For the past…
The Drillago Company is involved in searching for locations in which to drill for oil. The firm’s current project requires an initial investment of $15 million and has an estimated life of 10 years. The expected future cash inflows for the project are as shown in the following table: Year Cash inflows 1 $ 600,000 2 1,000,000 3 1,000,000 4 2,000,000 5 3,000,000 6 3,500,000 7 4,000,000 8 6,000,000 9 8,000,000 10 12,000,000 The firm’s current cost of capital is 13%. TO DO Create a spreadsheet to answer the following: Calculate the project’s net present value (NPV). Is the project acceptable under the NPV technique? Explain. \ Calculate the project’s internal rate of return (IRR). Is the project acceptable under the IRR technique? Explain. In this case, did the two methods produce the same results? Generally, is there a preference between the NPV and IRR techniques? Explain. d. Calculate the payback period for the…
Anglogold Ashanti (a gold mining company in South Africa) paid $500 million for the right to explore and extract rare metals from land owned by the Government of Namibia. To obtain the rights, Anglogold Ashanti agreed to restore the land to a suitable condition for other uses after its exploration and extraction activities. Anglogold incurred exploration and development costs of $80 million on the project. The company's credit-adjusted risk free interest rate is 7%. It estimates the possible cash flows for restoring the land, three years after its extraction activities begin, as follows: Cash Outflow Probability $ 15 million 60 % $ 40 million 40 % The asset retirement obligation (rounded) that should be reported on Anglogold's balance sheet one year after the extraction activities begin is? NOTE: For (PV of $1, PVA of $1), use 0.81630 as the appropriate discount factor to solve this problem..…
Highland Mining and Minerals Co. is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,627,000 and will produce $329,000 per year in years 5 through 15 and $518,000 per year in years 16 through 25. The U.S. gold mine will cost $2,042,000 and will produce $280,000 per year for the next 25 years. The cost of capital is 11 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. (Do not round intermediate calculations and round your answers to 2 decimal places.) The Australian mine The U.S. mine a-2. Which investment should be made?…
On January 2, 2021, an Australian Copper Exploration Company was investigating the feasibility of two mutually exclusive investment projects. The first prospective investment involved a strip (open-cut) mining operation in South Wales. The second investment also involved the extraction of copper, but this expenditure would be an underground site in Queensland. Preliminary drilling, sampling and analysis of both sites and consultation with geologists, costing the company $3600,000, suggested that both sites have similar copper reserves and useful lives. The copper extraction process for the two types of mines and the equipment required for operation of the mines are very different, however, with the underground mining operation expected to be more complex and difficult. The process of drilling underground also increases the dangers faced by employees, although it is more environmentally friendly than the pollution and soil erosion caused by open-cut mining operations. For the past…
Leland Industries is a producer of bakery and snack goods in Western Canada and are considering expending into Eastern Canada. The expansion is estimated to cost $10,000,000 for a new production facility. This project is in the same line of business as the firm's current operations and is therefore not expected to alter the risk of the firm. The most recent balance sheet is provided below. Leland Industries Balance Sheet As at Dec 31, 2021 Assets Liabilities Accounts Payable Other Current Liabilities $ Cash & Marketable Securities 425,000 300,000 Accounts Receivable $ 400,000 425,000 Inventories 500,000 Total Current Liabilities 725,000 Total Current Assets $ 1,325,000 Net Fixed Assets 18,000,000 LT Debt * 6,500,000 Preferred Stock ** 2,500,000 Common Stock*** 3,000,000 Retained Earnings 6,600,000 Total Liabilities & Total Assets $ 19,325,000 Owners Equity $ 19,325,000 Notes to financial statements: * The 5% semi-annual coupon bonds have a face value of $1,000, were issued 5 years ago…
Prime Petroleum Inc. is considering an acquisition of a new production facility in order to expand production ofit its main product, a gasoline additive Gas Gain. The cost of construction (first cost) is $9,000,000. The annualoperating cost is projected to be $700,000. The facility will be liquidated in 24 years, resulting in a salvage valueinflow of $2,000,000. Assuming MARR of 4%, compute the annual worth of the project's cash flows, and type inyour answer expressed as a cost (do not include negative sign with your answer
18. Suppose the marine salvage company described in the previous problem has located another ship that also contains treasure that could be sold for $12.1 million if it were brought to the surface. The firm is certain that if it invests $6.6 million now, it can recover the treasure in 1 year at no additional cost. The uncertainty now relates to the ownership of the ship. A government agency is currently considering whether the treasure found at this location belongs wholly to the finder or must be shared with a previous owner. In the latter case, the finder would be allowed to recover its direct costs ($6.6 million) but would have to turn over to the previous owner the remaining proceeds from the sale of the treasure. A ruling on this issue is expected in 1 salvąge company's manager believes the probability of a favorable ruling is 0.3. The rate of interest is 10%. What is the expected NPV of waiting until the ownership issue is settled in 1 year before deciding whether to undertake…
Highland and Minerals Company is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,648,000 and will produce $325,000 per year in years 5 through 15 and $523,000 per year in years 16 through 25. The U.S. gold mine will cost $2,047,000 and will produce $253,000 per year for the next 25 years. The cost of capital is 11 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. a-2. Which investment should be made? Australian mine U.S. mine b-1. Assume the Australian mine justifies an extra 2 percent premium over the normal cost of…
In early 2024, Menz Corporation acquired NeuroLab to obtain technology that NeuroLab was in the process of developing. The total acquisition cost included $2 million for this technology. At the time of acquisition, the technology had not yet reached the point of technological feasibility. During the remainder of 2024, Menz spent an additional $1 million to improve the technology, which then reached the point of technological feasibility by the end of the year. The new technology was expected to provide benefits to Menz over the subsequent five years. What amount of research and development expense would Menz record in 2024? Multiple Choice $2 million $3 million O $1 million $0
Please answer multi-choice question in photo.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS