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Beth J. Rocky Corp. is a mining company that is looking to take on a brand-new mining operation. The initial cost of setting up its
Beth J. Rocky Corp. is a mining company that is looking to take on a brand-new mining operation. The initial cost of setting up its new strip mine is $60,000. The company estimates that the mine produces $25,000 each year for the next three years. In year 4 , the corporation is obliged to restore the land it mined on, which will cost them $9,000. The required rate of return on this operation is 9.8% annually. a) (2 Points) Set up a timeline of cash flows for the operation. b) (3 Points) Calculate the net present value of this project. Does the NPV suggest this is a project worth taking? Explain. c) (2 Points) Calculate the payback period of this project. Should Rocky Corp. take on this project if it has a 3-year threshold for payback? Explain
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