PLEASE SOLVE IN EXCEL

value as high as $25 million or as low as $15 million. The face value of the company's debt, payable in two years, is $20 million. a. What are the possible payoffs to the bondholders under projects 1 and 2 ? b. What are the possible payoffs to the shareholders under projects 1 and 2 ? -. Wasi wii the shareholders favor? The bondholders? 3. Eastern Shallow, Ltd., is a gold mining company operating a single mine. The present price of gold is $300 an ounce and it costs the company $250 an ounce to produce the gold. Last CHAPTER 4 Real Options and Project Analysis year, 50,000 ounces were produced and engineers estimate that at this rate of production the mine will be exhausted in seven years. The required rate of return on gold mines is 10%. a. What is the value of the mine? b. Suppose inflation is expected to increase the cost of producing gold by 10% a year but the price of gold does not change because of large sales of stockpiled gold by foreign governments. Furthermore, imagine that the inflation raises the required rate of return to 21%. Now, what is the value of the mine? c. Suppose the company may shut, reopen, or abandon the mine in response to fluctuations in the price of gold. Can the NPV method be used to value the mine under these conditions? 4. G.D. Sorrell is developing an anticancer drug. The project is in its preliminary stage. G.D.S. must decide whether to initiate a large-scale drug test costing $1.5 million a year for two years. If the test results are positive, a $17.5 million plant to produce the drug for commer