Question1. Silver mine can yield 14,000 ounces of silver at a variable cost of the $30 per ounce. The fixed costs of operating the mine are $63,000 per year. In half years, silver can be sold for $46 per ounce; in other years, silver can be sold for only $23 per ounce. Ignore taxes.
a. What is average cash flow you will obtain from the mine if it is always kept in operation and the silver always is sold in the year it is mined?
b. Now assume you can shut down the mine in years of low silver prices. Compute the average cash flow from the mine.
Question2. When Stock A had a price of $120 at the beginning of the year, $150 at the end of the year and paid the $6 dividend during the year, what would be the annualized holding period return?