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Depending on the adoption of shale gas extraction technology in Poland and Ukraine, world natural gas prices will be either high or low in each of the years 2013- 2016. If they are high, prices will be $0.2 per cubic meter in 2013 and grow at 5% each year. If they are low, prices will be $0.1 per cubic meter in 2013 and grow at 5% each year. The probability of prices being high is 40%.
Today (2012) you are considering purchasing a license from the Russian government to extract natural gas from reserves in Siberia. These reserves can yield 10 billion cubic meters per year for at least 10 years; however, the license will expire after 2016. The variable costs (extraction) are $0.08 per cubic meter.
In addition to the variable costs, you need to install a pipeline to transport natural gas from your place of extraction to the buyers. This pipeline will cost $3 billion, and the installation must begin today (2012) in order to finish it in time to extract gas in 2013. At the end of 2016 you estimate that you will be able to sell this pipeline to the Russian government for $2 billion. The Russian government allows you to use straight line depreciation on this pipeline. The corporate tax rate is 30% and your average cost of capital is 11%.
What is the maximum you are willing to pay for this license?
Midland Oil has $1,000 par value bonds outstanding at 8 percent interest. The bonds will mature in 25 years. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. C..
These costs must be allocated to three revenue-producing patient services departments using the direct method.
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Determine the activity cost of converting the raw materials into 50 fireplace inserts.
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Use a rate of 3.95% for a 30 year term. This is the APR. Assume you are making a down payment of 10%, so you will borrow 90% of the purchase price you selected. Calculate the monthly principal and interest (P&I) payment required if the loan is financ..
Peter and Blair recently reviewed their future retirement income and expense projections.
Explain the likely interest rate conditions that would cause these premiums. Does this ensure that covered interest arbitrage is worthwhile?
What is the value? What is the loan amount? What is the Debt Yield?
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