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Silverado Mining Company is analyzing the purchase of two silver mines. Only one investment will be made. The Yukon mine will cost $2,450,000 million, which
Silverado Mining Company is analyzing the purchase of two silver mines. Only one investment will be made. The Yukon mine will cost $2,450,000 million, which will produce $490,000 per year in Years 5 through 15 and $980,000 per year in Years 16 through 25 . The Labrador mine will cost $2,940,000 million and will produce $367,500 per year for the next 25 years. The cost of capital is 10 percent. a-1. Calculate the net present value for each project. (Do not round Intermedlate calculations. Round the final answers to the nearest whole dollar. Enter your answers in whole dollars, not in millions.) a-2. Which investment should be made, if projects are mutually exclusive? Yukon Labrador b-1. If the Yukon mine justifies an extra 5 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. (Negatlve answer should be Indlcated by a minus sign. Do not round Intermedlate calculations. Round the final answers to the nearest whole dollar. Enter your answers in whole dollars, not in milllons.) b-2. Does the investment decision change? Yes No
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