In: Finance
A diamond mine is expected to produce regular annual cash flows of $1 million for 8 years with the first regular cash flow expected in 1 year from today. In addition to the regular cash flows of $1,000,000, the diamond mine is also expected to produce an extra cash flow of $3,000,000 in 8 years from today. The cost of capital for the mine is 12 percent. What is the value of the mine?
Bob has an investment worth $300,000. The investment will make a special payment of X to Bob in 2 years from today. The investment also will make regular, fixed annual payments of $65,000 to Bob with the first of these payments made to Bob in 1 year from today and the last of these annual payments made to Bob in 6 years from today. The expected return for the investment is 10 percent per year. What is X, the amount of the special payment that will be made to Bob in 2 years?