5 if the discount rate is 10 the npv is 100 dollars

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Unformatted text preview: s 100 Dollars If (55/1.1=50, 60.5/(1.1*1.1)) (55/1.1=50, If interest rate is 20%the NPV is If 45.83 which is equal to 55/1.2 45.83 + 42.03 Which is equal to 60.55/(1.2*1.2) = 87.86 Higher interest rates reduce value of future earning Non renewable resources Non The actual stock of non renewable resources is declining over The actual declining time, but known reserves may increase because of discoveries known increase Perceived shortages and improved discovery technologies Perceived trigger searches and lead to discoveries trigger Known oil reserves are estimated to last 40-80 years, the same Known estimate was given in the 1940s estimate Still oil and natural gas reserves may run out Non renewable resources are rarely depleted, but may become Non too expensive to mine Factor determining extraction: demand Factor Demand is reflecting marginal value of resource in applications (value Demand of oil in transportation and heating) of Higher incomes and lower prices increase demand Demand increases with increased population Demand It may be reduced by introduction and adoption of resource It conserving technologies (fuel efficient cars) conserving It is reduced by back stop technologies (solar energy) Demand can be reduced by Taxes Taxes Population policies Population R&D R&D Other factors determining extraction Other Extraction cost- reduced mining or harvesting cost or improved infrastructure (roads) increase extraction Recycling- alternative supply sources reduce extraction Known Reserves (more reserves increase extraction) Market structure Cartels...
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This note was uploaded on 03/18/2010 for the course ECON C125 taught by Professor Zelberman during the Spring '09 term at University of California, Berkeley.

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