A coal deposit can be mined more rapidly if a thirddragline, Ask an Expert

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A coal deposit can be mined more rapidly if a thirddragline and conveyor system is added. The initialcost would be $1.5M. Annual revenues for each ofthe next 12 years would increase from $800K to$1200K, and then for the next 6 years, revenueswould drop from $800K to $0. Thus, the mining is50% faster, and the deposit is depleted 6 yearsearlier. The system will have no salvage value. What roots are there for the PW equation? Is there a mean-ingful IRR? Is the third dragline economicallyattractive if iis 20%? Graph the PW for interest ratesof 0% to 100%?

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Financial Management, Finance

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