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Neo, Tutor
Category: Homework
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Experience:  BS Accounting
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C. Suppose you just inherited a gold mine. This gold mine

Customer Question

C. Suppose you just inherited a gold mine. This gold mine is believed to have three years worth of gold deposit. Here is how much income this gold mine is projected to bring you each year for the next three years:
Year 1: $42,000,000
Year 2: $62,000,000
Year 3: $99,000,000
Compute the present value of this stream of income at a discount rate of 8%. Remember, you are calculating the present value for a whole stream of income, i.e. the total value of receiving all three payments (how much you would pay right now to receive these three payments in the future). Your answer should be one number - the present value for this oil well at a 8% discount rate but you have to show how you got to this number.
Now compute the present value of the income stream from the gold mine at a discount rate of 6%, and at a discount rate of 4%. Compare the present values of the income stream under the three discount rates.
Submitted: 7 years ago.
Category: Homework
Expert:  Neo replied 7 years ago.

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Customer: replied 7 years ago.



How did you get the PV Factor? For instance year 1 at 8% PV Factor is 0.9259.

Expert:  Neo replied 7 years ago.

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Customer: replied 7 years ago.
That explains it, thanks.