What is the value of the new mine

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Reference no: EM132029397

Dwarves, Inc. has opened a new mine to extract the elusive and valuable mineral mithril. For the first year (t=1), the Dwarves expects real cash flows of $38. Because the Dwarves will exhaust the mineral over time, it expects real cash flows to decrease at 2.5% per year in perpetuity. The real required return is 5% and the nominal required return is 10%. What is the value of the new mine?

Reference no: EM132029397

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