economics question be clear, show steps and correct solution for rating solve in 30 minutes for...
economics question be clear, show steps and correct solution for rating solve in 30 minutes for thumbs up rating
A piece of land may be bought for $600,000 to be strip-mined for coal. Annual net income will be $500,000 a year for 10 years. At the end of the 10 years, the surface of the land will be restored as required by a federal law on strip mining. The reclamation will cost $1,500,000 more than the resale value of the land after it is restored. Using a 10% interest rate compounded quarterly, find the present worth of this project (Don't use the $ sign in your answer)
Homework Answers
Rate per quarter =10%/4 =2.5%
EAR=(1+2.5%)^4-1=10.381289%
Number of Periods =10
Present Worth of the project =PV of Annual Net Income -PV of
Reclamation cost -Initial Investment
=500000*((1-(1+10.381289%)^-10)/10.381289%)-1500000/(1+10.381289%)^10-600000=1,863,952.57
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