Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. The company estimated the following cash flows related to opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $ 420,000 $ 230,000 $ 165,000* $ 66,000 $ 91,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2; to determine the appropriate discount factor(s) using tables. .…………….……………………... Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted?
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- Check my work Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in year three Salvage value of equipment in four years $ 410,000 $ 135,000 S 150,000* $ 47,000 S 72,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present…Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (CS stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$67.7 million and annual operating expenses of C$19.44 million Maritime expects that over a five-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal cash flow. Maritime uses straight-line depreciation, has a 21.07% corporate tax rate, and has a(n) 11.1% cost of capital. a. Calculate the periodic cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project.…Integrative: Complete investment decision With the market price of gold at CS1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.1 million and annual operating expenses of CS19.38 million. Maritime expects that over a 5-year operating life it can recover 173,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.01% corporate tax rate, and has a(n) 10.9% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project. e.…
- Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.3 million and annual operating expenses of C$19.37 million. Maritime expects that over a five-year operating life it can recover 175,000 ounces of gold from the mine and that the project will have no terminal cash flow. Maritime uses straight-line depreciation, has a 21.03% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the periodic cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project.…Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.4 million and annual operating expenses of C$19.43 million. Maritime expects that over a 5-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.06% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project.Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.4 million and annual operating expenses of C$19.43 million. Maritime expects that over a 5-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.06% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project. e.…
- Financial Management Question QUESTION TWO A company is considering an investment proposal to install new milling controls. The project will cost Kshs 50,000,000. The facility has a life expectancy of five years and no salvage value. The company’s tax rate is 40%. The estimated cash flows from the proposed investment proposal are as follows: Year CF Kshs 000 1 13,000 2 14,000 3 18,000 4 23,000 5 25,000 Compute: Accounting Rate of Return Discounted payback period at 6% discounting factor Net present value at 15% discounting factor and advise management on the project’s feasibilityWindhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. The company estimated the following cash flows related to opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years. $ 330,000 $ 200,000 $ 135,000* $ 60,000 $ 85,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted?Problem 14-16 (Static) Net Present Value Analysis [LO14-2] Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years $ 40,000 Salvage value of equipment in four years $ 65,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. $ 275,000 $ 100,000 $ 120,000* The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 20%. Required: a. What is the net present value of the proposed mining project? b. Should the project be…
- c. Sabuni Itd is considering expanding its operation by acquiring a new plant in Mombasa. The cost of the plant is 50 million. The new plant is expected to generate the following projected cash flows for a period of 5 years. Year 1 3 Cash 15,000,000 18,000,000 20,000,000 25,000,000 35,00,000 flows Required: Using NPV technique, advise the company on whether to acquire the plant if the discount rate is 10% LERO)Required information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $. Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -870,000 -300,000 -920,000 250,000 4 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors. The equivalent annual cost of the project is $-1Question 1 Downtown Plc is in the process of evaluating two alternative projects, which are mutually exclusion. The projects will both required two different manufacturing machines and, both machines will have no residual values at the end of the project. Due to certain restrictions, only one of the two projects can be implemented. The following estimated cash flows over the life of the two projects are provided below: Cash Flows Year Project A Project B £(millions) £’(millions) 0 -600 -650 1 250 200 2 250 200 3 250 300 4 100 250 The company’s cost of capital is 10%. Calculate the net present value (NPV) of both projects and recommend with reasons which project should be implemented by