An investor is interested in purchasing a company and wants you to determine the maximum value of the company today considering the opportunity cost of capital is 20%. The company assets are in two areas. First, an existing production operation was developed by the company over the past two years for equipment and development costs of $100,000 two years ago, $200,000 one year ago, and cost and revenues that canceled each other during the past year. It is projected that revenue minus operating expense net profits will be $120,000 per year at the end of each of the next 12 years when production is expected to terminate with a zero salvage value. The second company asset is a mineral property that is projected to be developed for a $350,000 future cost one year from now with expected future profits of $150,000 per year starting two years from now and terminating 10 years from now with a zero salvage value. Use NPV analysis to determine the value of the company on a before-tax basis. Are there any sunk costs in this problem?

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