Canadian Metal, Mining, and Petroleum Company is analyzing two projects for possible investment. Only one investment will be made. The first project is an oil drilling project in Alberta at a cost of $500 million that will produce $100 million per year in Years 5 through 10 and $200 million per year in Years 11 through 20. The second project is an expansion of an aluminum smelter in Mapletree, Quebec, and will cost $500 million and will produce $87 million per year for Years 2 through 20. The cost of capital is 12 percent. a-1. Calculate the net present value for each project. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar. Enter your answers in whole dollars, not in millions.) Net present value $ 125.11 Oil wells Aluminum smelter $ 72.16 a-2. Which investment should be made, if projects are mutually exclusive? Oil wells Aluminum smelter b-1. If the oil-well project justifies an extra 4 percent premium over the normal cost of capital because of its riskiness and relative uncertainty of flows, recalculate the net present value of the mine. (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answers to the nearest whole dollar. Enter your answers in whole dollars, not in millions.) Net present value $ 100.04 Oil wells b-2. Does the investment decision change? A $1,000 par value bond was issued 35 years ago at an 8 percent coupon rate. It currently has 10 years remaining to maturity. Interest rates on similar debt obligations are now 16 percent. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. Compute the current price of the bond using an assumption of semiannual payments. Price of the bond $ 607.23 % b. If Mr. Mitchell initially bought the bond at par value, what is his percentage loss (or gain)? (Input the amount as positive value.) Percentage Loss 39.28 % c. Now assume Mrs. Gordon buys the bond at its current market value and holds it to maturity, what will her percentage return be? (Input the amount as positive value.) Percentage Gain 64.68 % d. Although the same dollar amounts are involved in parts b and c, explain why the percentage gain is larger than the percentage loss. Investment is larger Investment is smaller Canadian Metal, Mining, and Petroleum Company is analyzing two projects for possible investment. Only one investment will be made. The first project is an oil drilling project in Alberta at a cost of $500 million that will produce $100 million per year in Years 5 through 10 and $200 million per year in Years 11 through 20. The second project is an expansion of an aluminum smelter in Mapletree, Quebec, and will cost $500 million and will produce $87 million per year for Years 2 through 20. The cost of capital is 12 percent. a-1. Calculate the net present value for each project. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar. Enter your answers in whole dollars, not in millions.) Net present value $ 125.11 Oil wells Aluminum smelter $ 72.16 a-2. Which investment should be made, if projects are mutually exclusive? Oil wells Aluminum smelter b-1. If the oil-well project justifies an extra 4 percent premium over the normal cost of capital because of its riskiness and relative uncertainty of flows, recalculate the net present value of the mine. (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answers to the nearest whole dollar. Enter your answers in whole dollars, not in millions.) Net present value $ 100.04 Oil wells b-2. Does the investment decision change? A $1,000 par value bond was issued 35 years ago at an 8 percent coupon rate. It currently has 10 years remaining to maturity. Interest rates on similar debt obligations are now 16 percent. (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answers to 2 decimal places.) a. Compute the current price of the bond using an assumption of semiannual payments. Price of the bond $ 607.23 % b. If Mr. Mitchell initially bought the bond at par value, what is his percentage loss (or gain)? (Input the amount as positive value.) Percentage Loss 39.28 % c. Now assume Mrs. Gordon buys the bond at its current market value and holds it to maturity, what will her percentage return be? (Input the amount as positive value.) Percentage Gain 64.68 % d. Although the same dollar amounts are involved in parts b and c, explain why the percentage gain is larger than the percentage loss. Investment is larger Investment is smaller