Q10

A silver mine can yield 15,000 ounces of silver at a variable cost of $36 per ounce. The fixed costs of operating the mine are $45,000 per year. In half the years, silver can be sold for $52 per ounce; in the other years, silver can be sold for only $26 per ounce. Ignore taxes. a. What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it is mined? (Leave no cells blank. Enter "O" wherever required. Do not round intermediate calculations.) Average cash flow b. Now suppose you can costlessly shut down the mine in years of low silver prices. What happens to the average cash flow from the mine? (Do not round intermediate calculations.) Average cash flowAn auto plant that costs $120 million to build can produce a line of exfuel cars that will produce cash ows with a present value of $180 million ifthe line is successful but only $50 million if it is unsuccessful. You believe that the probability ofsuccess is only about 45%. You will learn whether the line is successful immediately after building the plant. a-1. Calculate the expected NPV. [Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal placeJ a-2. Would you build the plant? Suppose that the plant can be sold for $110 million to another automaker ifthe auto line is not successful. {Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answers in millions rounded to1 decimal place.} b-1. Calculate the expected NPV. b-2. Would you build the plant? a1. Expected NPV 212. Would you build the plant? b1. Expected NPV b2. Would you build the plant