Costs (millions of $)ConstructionRecurring costsForegone recreationBenefitsNetNPV @NPV @BenefitsIncreased tourist revenueProject 2. Javaland Coral MiningCosts (millions of $)NPV @NPV @2.58Extraction costsCosts of coastal erosionRevenues from limestonenet2.58Years0123$4,980.0045678910$1,400.00$250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00$20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00$400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00 $400.00$4,000.00$100.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00$0.00$0.00 In this problem you will examine competing plans for the stewardship of the reefs of Jaxaland.The first plan is to protect the reefs of Javaland by means of a marine park. The marine parkrequires an initial investment in buildings and boats and recurring expenses for park guards, fueland so on. The benefits of the marine park would come from increased tourism that the parkcould sustain beyond what would normally be possible without such park management.The second project envisions large-scale and rapid mining of Jaxaland's reefs for limestone. Thereef would be mined and the limestone sold in the first year. Unfortunately, the reef destructionthat results from the mining would cause increased beach erosion, and this would be a direct costfor the economy.The spreadsheet on the next page states all the costs and benefits of the two projects over the nextten years (an eternity by Jaxaland standards). Your job is to determine which project is the best.(Remember, Jaxaland cares only about the world as defined in this spreadsheet - no additionalvalues here!) To complicate your life, it is unclear whether the discount rate for Jaxaland is 2.5%or 8%, so you must do the calculations for both.Here's what you have to turn in:1) Your spreadsheet or calculations.2) Net Present Value of Project 1 using a discount rate of 2.5%.3) Net Present Value of Project 1 using a discount rate of 8%.4) Net Present Value of Project 2 using a discount rate of 2.5%.5) Net Present Value of Project 2 using a discount rate of 8%6) Which project do you choose using a discount rate of 2.5%?7) Which project do you choose using a discount rate of 8%?8) Explain the implications of your results. What rate does Jaxaland choose and why? Why mightJaxaland choose to do the analysis this discount rate over the other? Be specific. In other words, ifpoliticians of Jaxaland argue for one rate as most appropriate, what would/could influence theirdecision? What would the arguments be based on? (Here, write a few sentences that reflect yourunderstanding of discounting and time preference.) Hint: One $ total being greater than anotheracross different rates is NOT a correct answer. You cannot compare dollars across rates.)Please present your answers clearly and separate from you spreadsheet.Remember:Net benefits = total benefits - total costsNet present value (NPV) = present value of (benefits - costs)Please show all of your work. Be sure to write out your equations and calculations. If you use aspreadsheet, then you must also show how you would have done the calculations manually, thatis, write out the equation you used.

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Description: Costs (millions of $)ConstructionRecurring costsForegone recreationBenefitsNetNPV @NPV @BenefitsIncreased tourist revenueProject 2. Javaland Coral MiningCosts (millions of $)NPV @NPV @2.58Extraction costsCosts of coastal erosionRevenues from limesto

Net Present Value: It is a financial metric used in capital budgeting to determine the net worth of…

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Business

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Here's what you have to turn in: 1) Your spreadsheet or calculations. 2) Net Present Value of Project 1 using a discount rate of 2.5%. 3) Net Present Value of Project 1 using a discount rate of 8%.

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter12: Integer Linear Optimization_models

Section: Chapter Questions

Problem 3P: Spencer Enterprises is attempting to choose among a series of new investment alternatives. The...

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An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would require an initial outlay of $269.75 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $93.85 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 17%. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not…
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