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After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to mine the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environmental damage. To go ahead with the extraction, CTC must spend $900,000 for new mining equipment and pay $165,000 for its installation. The gold mined will net the firm an estimated $350,000 each year over the 5-year life of the vein. CTC"s cost of capital is 14 percent. For the purposes of this problem, assume that the cash inflows occur at the end of the year.
a. What is the NPV and IRR of this project?
b. Should this project be undertaken, ignoring environmental concerns?
c. How should environmental effects be considered when evaluating this, or any other, project? How might these effects change your decision in part b?
Ezzell Company issued preferred stock with a stated dividend of 10% of par. Preferred stock of this type currently yields 8 percent, and the par value is $100. Suppose dividends are paid annually.
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%.
in recent months there have been many news stories in the press about executive compensation with stock options.nbsp
If resulting profits are repatriated to production unit in Canada monthly, what risk does this production unit face? How might it hedge this risk?
Capital Grill has budgeted the following costs for a month in which 2,500 Colby Steak dinners will be produced and sold: Materials, $5,580; hourly labor, $5,400; rent, $1,300; depreciation, $500; and other fixed costs, $1,000. Each Colby Steak din..
analyze and synthesize the financial reports of an organization of their choice and present their findings in a
The Beasley Company has been experiencing declining earnings, but has just declared a 50% salary rise for its top executives. A dissident group of shareholder wants to oust the existing board of directors.
One year from today you must make a payment of $6,000. To prepare for this payment, you plan to make 2 equal quarterly deposits, at the end of Quarters 1 and 2, in a bank that pays 5% nominal interest, compounded quarterly. How large must each of ..
Describe the risks associated with each investment
If a firm issues 10,000 shares of common stock with a par value of $5 and for a sales price of $15, what amount would be recorded in the paid-in capital account?
The machine is expected to have a salvage value of $30,000. Gorton's income tax rate is 40%. What is the machine's IRR?
The old press is being sold for $350,000 and it has a net book value of $75,000. Assume that National Geographic is in the 40% income tax bracket. How much will National Geographic pay in income taxes from the sale?
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