Deep Woods Coal Mines Owns a Shallow Mine Which Is

question 27

Multiple Choice

Deep Woods Coal Mines owns a shallow mine which is currently sitting idle. The property, which includes the mine, was originally purchased for $18.5 million. The property was valued at $6.8 million when mining ceased and is currently valued at $7.1 million. If the company would spend $329,000, they could convert this unused mine into an underground storage facility for campers, vehicles, and boats. The company estimates that storage fees of $280,000 can be generated per year which would net the firm an annual net income of $163,001. What is the opportunity cost associated with the storage facility project? (Answer in millions)

• A) $6.8 million
• B) $7.1 million
• C) $7.129 million
• D) $7.429 million
• E) $7.564 million

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