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What is the present value of the interest tax shield

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Reference no: EM132828443

Problem 1: Troy Gold has an opportunity to invest in a gold mine. The initial investment is 250 million. Analysts estimate that the mine will produce 100 000 ounces of gold bar per year for the next 10 years. The extraction cost of gold is $150 per ounce and is expected to remain at that level. The current price of gold is $600 per ounce and is expected to increase 4% per year for the next 10 years. What is the NPV of the project at a discount rate of 10 percent? (ignore taxes)

A. -$3.8M

B. $240.8M

C. None of the answers is correct

D. $257.8M

E. $84.9M

Problem 2:  North York Inc. borrow $50 million for one year at an interest rate of 9%, what is the present value of the interest tax shield? Assume a 21% marginal corporate tax rate.

A. $1.45M

B. $10.5M

C. $0.87M

D. $21M

E. $17.5M

Reference no: EM132828443

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