Anonymous
Anonymous asked in Social ScienceEconomics · 9 years ago

what is the present value of future profit from this deposit for i= 0.10 .. plz help?

it is estimated that a mineral deposit will produce 27,000 ton in the coming year and 24,300 ton in the subsequent year. it is expected that for the first 12 years the production pattern will be of the type V.e alepha.k and that for the following 8 years the production will be stable at the same rate as on the twelfth year. what is the present value of future profit from this deposit for i= 0.10 if it is assumed that profit per ton after mining expenses will be 5$ for the first 8 years and 7$ for the remaining 12 years.

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  • 9 years ago
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    Let the production (in thousand tonnes) in years 3 to 12 be q3, q4, .....q12 and for the reaming 8 years be q = q12 for each year.

    The present value of the future profits from this deposit would be

    $1000 *[ 27*5/(1.1) + 24.3*5/(1.1)^2 + q3*5/(1.1)^3 + q4*5/(1.1)^4 + q5*5/(1.1)^5 +q6*5/(1.1)6

    + q7*5/(1.1)^7 +q8*5/ (1.1)^8 + q9*7/(1.1)^9 + q10*7/(1.1)^ 10 + q11*7/(1.1)^11 + q*7{ 1/1.1^12

    + 1/1.1^13 + ...........................+1/1.1^20}].

    Since the meaning of ' type V.e alepha.k' in your question is not clear, you have to put the numbers for q3 to q12 and q yourself and then work out the present value from the above expression.

    =

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