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Hickock Mining is evaluating when to open a gold mine. The mine has 46,400 ounces of gold left that can be mined, and mining operations will produce 5,800 ounces per year. The required return on the gold mine is 12 percent, and it will cost $33.8 million to open the mine. When the mine is opened, the company will sign a contract that will guarantee the price of gold for the remaining life of the mine. If the mine is opened today, each ounce of gold will generate an aftertax cash flow of $1,380 per ounce. If the company waits one year, there is a 60 percent probability that the contract price will generate an aftertax cash flow of $1,580 per ounce and a 40 percent probability that the aftertax cash flow will be $1,280 per ounce. What is the value of the option to wait? (Enter your answer in dollars, not millions of dollars, e.g.. 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Option value $
A project currently generates sales of $11.5 million, variable costs equal to 40% of sales, and fixed costs of $3.5 million. The firm’s tax rate is 35%. What are the effects on the after-tax profits and cash flow, if sales increase from $11.5 million..
Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $819,822, $863,275, $937,250, $1,020,110, $1,212,960, and $1,225,000 over the next six years. If the appropriate disco..
John takes out a 2000 10-year loan with an annual effective interest rate of 20%. The principal amount of the loan will be repaid with 10 equal size yearly payments made at the end of each year. The interest accrued on the loan will be repaid with ye..
Dividend Policy [LO 2] The Quick Buck Company is an all-equity firm that has been in existence for the past three years. Company management expects that the company will last for two more years and then be dissolved.
Your Bank has stated that it pays 3% Interest, annually compounded, for a 7-year certificate of deposit. You have decided to invest $10,000 for 7 years. If the average rate of Inflation during the 7 years is 2.5% per year during the 7 years, & you an..
What were the yields on the two representative outstanding Heinz-debt issues as of the end of April 2010? What were they one year earlier?
Find the real rate of return on the investment using the exact method: A bank account that yields a nominal annual rate of 1.6%, if a market basket of consumer items rises in price from $800 to $825.
Suppose someone offered to sell you a note calling for the payment of $1,000 15 months from today. They offer to sell it to you for $850. You have $850 in a bank time deposit which pays a 7% effective annual interest rate (compounding), and you plan ..
Once an observation is identified by an internal auditor as a fraudulent act committed by senior mgt. resulting in an amount considered insignificant and trivial, it should be: reported to senior management. reported to the independent outside audito..
You own a 10 year, $1000 par value bond paying 7.5 percent interest annually. The market price of the bond is $900, and your required rate of return is 11 percent. compute the bond's expected rate of return. determine the value of the bond to you, gi..
The Fast Reader Company supplies bulletin board services to numerous hotel chains nationwide. The owner of the firm is investigating the benefit of employing a billing firm to do her billing and collections. If the billing firm charges $ 375 per? mon..
A company's perpetual preferred stock currently sells for $115.00 per share, and it pays an $8.00 annual dividend.- What is the firm's cost of preferred stock?
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