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15 Jan 2018

The L-S Mining Company is planning to open a new strip mine inwestern Pennsylvania. The net investment required to open the mineis $10 million. Net cash flows are expected to be +20 million atthe end of year 1 and +5 million at the end of year 2. At the endof year 3, L-S will have a net ahs outflow of $17 million to coverthe cost of closing the mine and reclaiming the land.

1. calculate the net preent value of the strip mine if the cost ofcapital is 5, 10, 15, 30, 71, and 80 percent.

2. what is unique about this project?

3. should the project be accepted if L-S's cost of capital is 10percent? 20 percent?

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Trinidad Tremblay
Trinidad TremblayLv2
15 Jan 2018

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