Question
A coal mine is considering the addition of a centrifuge to dewater fine coal currently being discarded as waste. The new equipment will cost $2.5
A coal mine is considering the addition of a centrifuge to dewater fine coal currently being discarded as waste. The new equipment will cost $2.5 million and have a useful life of 15 years. The addition is expected to generate $1.1 million for years 1 5 and $2.9 million in years 6-15. The equipment will require a major overhaul in year 8. While this maintenance will not result in any added costs, the centrifuge will not contribute any revenue during year 8. The centrifuge has no salvage value. What is the net present value for this investment? Assume a discount rate of 10%.
Please enter your final answer in millions of dollars. For example, if your answer is $1,350,000, please enter "1.35".
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