A company is analyzing the acquisition of a concession. The government provides it for 6 years for an initial investment of $50,000,000 and the export equipment will cost another $50,000,000 (which is acquired in the initial period of the project), with the commitment that in year 8 it will reforest for $250,000,000. The annual income (from year 1 to 6) is $50,000,000. The IOT (Internal rate of opportunity) is 20% per year. The IRR (A.I.R.), which is greater than 10%, of this project, is:
A company is analyzing the acquisition of a concession. The government provides it for 6 years for an initial investment of $50,000,000 and the export equipment will cost another $50,000,000 (which is acquired in the initial period of the project), with the commitment that in year 8 it will reforest for $250,000,000. The annual income (from year 1 to 6) is $50,000,000. The IOT (Internal rate of opportunity) is 20% per year. The IRR (A.I.R.), which is greater than 10%, of this project, is:
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 18E
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A company is analyzing the acquisition of a concession. The government provides it for 6 years for an initial investment of $50,000,000 and the export equipment will cost another $50,000,000 (which is acquired in the initial period of the project), with the commitment that in year 8 it will reforest for $250,000,000. The annual income (from year 1 to 6) is $50,000,000. The IOT (Internal rate of opportunity) is 20% per year. The
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