Assume you have a limited stock of copper in a mine of 30 units. You want...

Assume you have a limited stock of copper in a mine of 30 units. You want to know how many units to extract this year (Q1) and how many to extract next year (Q2). The slope of the marginal benefit curve is: MB: y = -0.4Q + 12 and the slope of the marginal cost curve is: MC: y = 4 Use the formula PV(MB1 - MC1) = PV(MB2 - MC2) to calculate how many units of copper to extract this year and next year. The discount rate (r) is 9% (0.09). Report the optimal units of copper to extract this year (Q1), rounded to two (2) decimal places (XX.XX).

Solutions

Expert Solution

15.21 units of copper will be extracted this year and 14.79 units of copper will be extracted next year

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

You own a copper mine. The price of copper is currently €1.50 per pound. The mine...

You own a copper mine. The price of copper is currently €1.50 per pound. The mine produces 1 million pounds of copper per year and costs €2 million per year to operate. It has enough copper to operate for 100 years. Shutting the mine down would entail bringing the land up to environmental standards and is expected to cost €5 million. Reopening the mine once it is shut down would be an impossibility given current environmental standards. The price of...

Assume that you have 100 shares of XYZ stock which has a volatility of 30% and...

Assume that you have 100 shares of XYZ stock which has a volatility of 30% and a current stock price of £60 per share. XYZ pays no dividends. The risk-free interest rate is 3%. 4.1 Use the Black-Scholes option pricing model to value a six-month, at-themoney European put option on XYZ stock with the information as specified above. (10 %) 4.2 Given the information above, what action should you take to hedge using call options and put options, respectively? What...

Suppose you are advising a firm that operates a copper mine that faces the following types...

Suppose you are advising a firm that operates a copper mine that faces the following types of risks. The firm is asking for your opinion to buy or sell derivatives contracts to hedge its underlying operations or financial risk. For each risk type listed below, recommend a call or put option for the firm. Briefly justify your reasoning. A. Exposure to interest rates if the firm is planning to borrow $20 million 12 months from today. B.Exposure to an upcoming...

1. What would you multiply "grams of copper" by to get the units "atoms of copper"...

1. What would you multiply "grams of copper" by to get the units "atoms of copper" ? g Cu = atoms Cu (number) (unit) (number) (unit) (number) (unit) (number) (unit) 2. What would you multiply "atoms of calcium" by to get the units "grams of calcium" ? atoms Ca = g Ca (number) (unit) (number) (unit) (number) (unit) (number) (unit)

You have $12,500 you want to invest for the next 30 years. You are offered an...

You have $12,500 you want to invest for the next 30 years. You are offered an investment plan that will pay you 7 percent per year for the next 10 years and 9.5 percent per year for the last 20 years. How much will you have at the end of the 45 years? Please provide an Office Excel formula in your answer.

You have invested in a diamond mine in Nigeria. The mine is expected to generate nominal,...

You have invested in a diamond mine in Nigeria. The mine is expected to generate nominal, after-tax cash flow of $1 million per year in perpetuity at a risk-adjusted discount rate of 12.5% per year. Unfortunately, the Nigerian government requires that you leave each year's Cash flow in the Nigerian Treasury for five years after it is earned. The discount rate on the five-year Nigerian bonds is 10%. Assume end of year cash flows a. What is the value of...

Assume that you have a clock signal with frequency of 50 Hz, and you want to...

Assume that you have a clock signal with frequency of 50 Hz, and you want to divide this signal into a frequency of 1 Hz signal. The counter chips you must use are synchronous decade (MOD 10) counter chips 74160 and synchronous MOD 16 counter chips 74161. Please use the back side of this paper to draw your circuit diagram with all the details. You can use counter frequency division method to step down a higher frequency signal to a...

a-Assume you have a stack of integers. You want to organize it such that all numbers...

a-Assume you have a stack of integers. You want to organize it such that all numbers that are smaller than -100 go to the bottom, numbers between -100 and +100 in the middle and numbers larger than 100 in the top. Write a Java code that uses no more than three additional Stacks to solve the problem. NB: You do not need to write the code for Stacks, you are using a Stack from the library with a name SStack...

You have a viral stock of an unknown concentration and you want to determine the titer...

You have a viral stock of an unknown concentration and you want to determine the titer of the virus by plaque assay. Your lab mate has VERO cells growing in the lab and you decide to use them for a plaque assay. After infection with a range of dilutions, none of the plates showed plaques. Give 2 possible reasons why you did not get any plaques. You repeat the plaque assay using CHO as the target cells this time. You...

Audit Question: ABC Limited is a copper producer in Africa. You are the auditor of ABC...

Audit Question: ABC Limited is a copper producer in Africa. You are the auditor of ABC and auditing it's financial statements for the year ended 31 December 2016. Subsequent to the year-end date, the compant was found to be in breach of an environmental regulation caused the whole copper mine to shut down. ABC subjected to a significant amount of fines charged by the government. Because of the shutting down of the mine, ABC was unable to deliver the copper...

Subjects