Book answers

Book answers - Answers to selected problems from the text p...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Answers to selected problems from the text p. 293 / problem 3 the PV(1 million oz of gold in 8 years) = $280*1mil = 280 mil the price of gold in 8 years will be 280*1.055 8 = $429.71 per oz p. 270 / problem 11 NPV Piston = $201 NPV Turbo = $319 this is the preferable plane p. 270 / problem 10 a. the expected NPV is = -100 + 0.5*140 + 0.5*50 = -5 mil do not build b. now the expected NPV is = -100 + 0.5*140 + 0.5*90 = 15 mil p. 239 / problem 2 a. r nominal = 0.06 + 0.9*0.08 = 0.132 (nominal rate) (1+r nominal ) = (1+r real )*(1+i); then r real = 0.0885 (real rate) b. r proposed = 0.2 + 0.0885 = 0.2885 NPV 1 = -10 mil + 3 mil / 1.2885 + 3 mil / 1.2885 2 + … + 3 mil / 1.2885 10 = -425,800 NPV 2 = -10 mil + 2 mil / 1.2885 + 2 mil / 1.2885 2 + … + 2 mil / 1.2885 15 = -3,222,300 c. expected income from well 1: 0.2*0 + 0.8*3 = 2.4 mil expected income from well 2: 0.2*0 + 0.8*2 = 1.6 mil NPV 1 = -10 mil + 2.4 mil / 1.0885 + 2.4 mil / 1.0885 2 + … + 2.4 mil / 1.0885 10 = 5,504,600 NPV 2 = -10 mil + 1.6 mil / 1.0885 + 1.6 mil / 1.0885
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Book answers - Answers to selected problems from the text p...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online