A silver mine can yield 14000 ounces of silver at a variable cost of $30 per ounce. The fixed costs of operating the mine are $63000 per
year. In half the years silver can be sold for $46 per ounce; in the other years silver can be sold for only $23 per ounce. Ignore taxes.
What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it
Now suppose you can shut down the mine in years of low silver prices. Calculate the average cash flow from the mine.
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