1. What is the maximum amount an investor should pay for a 28-year bond with a $25,000 face value and 9% coupon rate (interest paid only semiannually)? The bond will be kept to maturity. The investors effective annual interest rate for economic decisions is 10%.

2. Escondida Mine in Chile has been so successful with their Phase IV-A Expansion that they are planning to expand their plant with all new equipment. They are going to start enlarging their plant by purchasing the following equipment:

Equipment	Original Size	Cost of Original Equipment (millions)	Power-Sizing Exponent	New Equipment Size
SAG Mill	50,000 tons	$350	0.80	75,000 tons
Cyclones	7,500 gal	$250	0.22	15,000 gal
Flotation Circuit	3,000 ft3	$300	0.6	12,000 ft3

What would be the cost for Escondida to obtain this equipment assume that they can trade the old equipment for 15% of its original cost? Assume also that the relative price to purchase the equipment has not changed over time (that is, there has been no inflation in equipment prices).