Managerial Decision Modeling

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1. StillWater Mining Company
Interest Rate12%
Price per ounce$ 1,500.00
Cost per ounce$ 400.00
Total ounces a year10,000
Profit per ounce$ 1,100
Revenue per year$ 15,000,000.00
Cost per year$ 4,000,000.00
Profit per year$ 11,000,000.00

Every year for the next 10 years, the firm earns a profit of $11 Million. The cash flow (in $ Million) is shown below: YearTT+1T+2T+3T+4T+5T+6T+7T+8T+9

Using NPV formula, we find NPV=$62,152,453.31

b) The NPVs (in $ Million) for variations in profit per ounce and interest rate are shown in table below:

2. Savings for Future Expenditures

Interest Rate8%
Current College Tuition$ 40,000
Annual growth rate of tuition5%
Time of first college payment (yrs)6
Time of last college payment (yrs)9
Annual growth rate of investment6%
Time of last investment (yrs)9

a) The cash flow of tuition (in dollars) is shown below:
To cover the tuition expenses she has to invest something today which if it grows at 6% every year for 9 years, provides the same NPV as the NPV of the tuition payment. Thus the present value at 0 is the initial investment. Using NPV and cash flow formula, where C_i is cash flow of tuition, and A initial investment: NPV(8%,9)=∑_(i=0)^9▒〖...
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