A firm wants to open a new coal mine. The price of coal is very volatile and the projected profits.. 1 answer below »

A firm wants to open a new coal mine. The price of coal is very volatile and the projected profits over the next five years are : Rs. 100,000 , Rs. 250,000 , Rs. 10,000 , Rs. 200,000 and Rs. 50,000 respectively. After that profits will be a constant Rs. 150,000 per year for next 20 years at which time the mine closes. If 7% is the appropriate discount rate for the first five years and is 8% after that, what is the present value of the mine? Ans: 1,558,234.4

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