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The following information is to be used for Questions 17 and 18 Areva NC extracts uranium from deposits licensed by the government of Niger.
The following information is to be used for Questions 17 and 18
Areva NC extracts uranium from deposits licensed by the government of Niger. Assume that the cost of extraction can be expressed as € , where Yt represents amount extracted over the course of period 't', and St represents the amount of minable uranium in the ground at the beginning of period 't' The price at which each unit of uranium is sold is less than €2 (Areva sells to European buyers and expresses all money values in terms of euros). € Yt^2/St
Areva has signed an agreement with officials in Niger that allows extraction from the deposit over the next five years (2015-2019).
17. At the beginning of fiscal 2015, as the industrialized world is threated with recession stemming from U.S. 'debt-ceiling' debates, Greece bond default, and terrorist threats to Middle East oil production, Areva's investment opportunities are re-evaluated. Its expected interest return on all of its assets is reduced from 5% to 3% for all years 2015- 2019.
What will be the effect on Areva's planned extraction in 2015 (Y2015)?
A. Y2015 falls
B. Y2015 is unchanged, as no uranium ore has yet been extracted (no depletion has taken place)
C. Y2015 rises
D. The effect on Y2015 cannot be determined
Econ3W03, Winter, 2015, Midterm Examination, Version 1 Page 16