Reference no: EM13886730
Mining is proposed for a wilderness area that provides two benefits: recreation (due to backpacking opportunities) and biodiversity (there are endangered wildlife and plants). The mining is expected to reduce backpacking visits from the current 10,000 recreation visitor-days (RVDs) per year to 4,000 RVDs per year for the next 10 years; after that time, recreation use would partially rebound to 7,000 RVDs per year into perpetuity. If the mine is not opened, recreational use is expected to continue at current levels into perpetuity. Mining is expected to bring profits of $1 million per year for the 10 years of mining operations.
a. What is the present value of mining in the area (excluding effects on recreation) if the interest rate is 6%? If it is 3%?
b. If one RVD of backpacking is worth $P, what is the present value of recreation in the area if it is mined? If it is not mined? Do this calculation using both a 6% and a 3% discount rate.
c. How much would an RVD of backpacking have to be worth (i.e., what is P) to make the benefits of mining worth less than the benefits of not mining, considering only the benefits and costs of mining and recreation? Do the calculation for both 6% and 3% discount rates.
d. Suppose that travel cost studies determined that an RVD of backpacking in the wilderness is worth $80 per RVD. Would preservation be the efficient solution, considering only the benefits and costs of recreation and mining, at 6% discount rate? At 3% discount rate?
e. Which discount rate makes the best case for mining?
f. One option for the area is to delay mining for 10 years. If an RVD of backpacking is worth $80, what is the present value of this alternative? How does it compare with the present value of mining the area in the present?
Bond brokers causes bonds to become more liquid
: Suppose that competition amongst bond brokers causes bonds to become more liquid. Using the liquidity preference model, show graphically how this will affect money demand and the nominal interest rate.
|
Fifo method of inventory pricing
: Various types of accounting changes can affect audit reporting.
|
What did the spanish encounter at the time of the conquest
: What did the Spanish encounter at the time of the conquest? Myths vs. realities of pre-Columbian Americas? Why such a relatively easy victory for colonizers? What is Mann's overriding thesis, what is he trying to teach us in these chapters?
|
Determined to ascertain what investors expect the yield
: Suppose that the current 1-year Treasury bond yield is .02 and the 2-year Treasury bond yield is .03. Use the expectations theory of how long-term interest rates are determined to ascertain what investors expect the yield to maturity to be for a 1-ye..
|
Which discount rate makes the best case for mining
: Mining is proposed for a wilderness area that provides two benefits: recreation (due to backpacking opportunities) and biodiversity (there are endangered wildlife and plants). Which discount rate makes the best case for mining? What is the present va..
|
Navier-stokes equation for the ?ow
: Simplify the appropriate Navier-Stokes equation for the ?ow between parallel plates assuming u ¼ u(y) and gravity in the z-direction. The streamlines are assumed to be parallel to the plates so that v ¼ w ¼ 0.
|
Component of the velocity vector
: 1. If the x-component of the velocity vector is constant in a plane ?ow, what is true of the y-component of the velocity vector?
|
Consumer and investor confidence grows
: Using the loanable funds theory, show in a graph how the following events will affect the supply and demand for loans and the equilibrium nominal interest rate: Recent signs of economic growth cause an increase in the public's expectations of future ..
|
Explain proper use of html with all of the elements
: The proper use of HTML, with all of the elements, codes, tags, headers, forms, Metadata, and categories will assure that you will structure your site to be accessible to the users of your site, your target audience
|