mine.Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She also has projected theexpense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $825 million today, and it willhave a cash outflow of $75 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it.The expected cash flows each year from the mine are shown in the following table. Bullock Mining has a 12 percent required return on allof its gold mines.Year0123456789Cash Flow-$825,000,000160,000,000185,000,000215,000,000245,000,000210,000,000205,000,000190,000,000160,000,00075,000,000

Net Present value = Present value of positive cash flow - Present value of negative cash flowPresent…

Answered: Alma has used the estimates provided by…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Beyer Company is considering buying an asset for $350,000. It is expected to produce the following net cash flows. Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.)
FNV Industries is considering the purchase of a new processing machine. The initial cost of the machine will be $246,410. The expected increase in net cash inflow as a result of the purchase is: $90,666 for the first year, $73,107 for the second year The machine will have a salvage value of $0 at the end of the second year. Assume that all cash inflows are received at the end of the year. At a discount rate of 6%, what is the net present value of the machine? Round your answer to the nearest whole dollar.
Johnson Sporting Goods is considering a project that will produce sales of $39,050 and have projected expenses of $22,700. Taxes will be $4,000 and the depreciation expense will be $2,275. An initial cash outlay of $1,850 is required for net working capital. What is the project's operating cash flow?
Stu is working on a bid for a contract. Thus far, he has determined that he will need $218,000 for fixed assets and another $41,000 for net working capital at Time 0. He had also determined that he can recover $79,900 aftertax for the combined fixed assets and net working capital at the end of the 3-year project. What operating cash flow will be required each year for the project to return 14 percent in nominal terms?
XYZ, which currently sells art products, is considering project Q, which would involve teaching art lessons For most of its existence, XYZ sold art products, taught art lessons, and painted murals Project Q Would require an initial investment of $87,300 today and is expected to produce annual cash flows of $10,200 each year forever with the first annual cash flow expected in 1 year What is the NPV of project Q. based on the information in this paragraph and the following table and applying the pure play approach to detemining a project's cost of capital? Firm XYZ Frisco Frescos NorCal Art Art Factory Line of business Sells art products Paints murals at residential and commercial sights Teaches art lessons Sells art products, teaches art lessons, & paints murals WACC 144 percent 82 percent 95 percent 77 percent O a. $20,068 (plus or minus $10) Ob. $144,518 (plus or minus $10) OC. $37,090 (plus or minus $10) O d. $45,168 (plus or minus $10) O e. None of the above is within $10 of the…
The Merriweather Printing Company is trying to decide on the merits of constructing a new publishing facility. The project is expected to provide a series of positive cash flows for each of the next four years. The estimated cash flows associated with this project are as follows: Year. Project cash flow 0 ? 1 $810,000 2 $390,000 3 $260,000 4 $460,000 If you know that the project has a regular payback of 2.4 years, what is the projects IRR?
Roopali is considering an investment proposal with the following cash flows: Initial investment-depreciable assets $45,000 Initial investment-working capital 5,000 Net cash inflows from operations (per year for 7 years) 10,000 Disinvestment-depreciable assets 3,000 Disinvestment-working capital 2,000 Determine the payback period. Round to one decimal place. Determine the accounting rate of return on initial investment. round to three decimal places. Determine the accounting rate of return on average investment
Prescott Corporation is considering an investment in new equipment costing $928,000. The equipment will be depreciated on a straight-line basis over a ten-year site and is expected to have a residual value of $106.000. The equipment is expected to generate net cash inflows of $144,000 for each of the first five years and $102,000 for each of the last five years. What is the accounting rate of return associated with the equipment investment? (Round your answer to two decimal places.) OA. 7.89% OB. 9.63% OC. 9.39 % OD 9.05%
Coyne Corporation is evaluating a capital investment opportunity. This project would require an initial investment of $35,000 to purchase equipment. The equipment will have a residual value at the end of its life of $4,000. The useful life of the equipment is 4 years. The new project is expected to generate additional net cash inflows of $23,000 per year for each of the four years. Coyne's required rate of return is 10%. The net present value of this project is closest to:
Jefferson Products Inc. is considering purchasing a new automatic press brake, which costs $320,000 including installation and shipping. The machine is expected to generate net cash inflows of $90,000 per year for 12 years. At the end of 12 years, the book value of the machine will be $0, and it is anticipated that the machine will be sold for $110,000. If the press brake project is undertaken, Jefferson will have to increase its net working capital by $100,000. When the project is terminated in 12 years, there will no longer be a need for this incremental working capital, and it can be liquidated and made available to Jefferson for other uses. Jefferson requires a 9 percent annual return on this type of project and its marginal tax rate is 40 percent. Use Table II and Table IV to answer the questions. Calculate the press brake's net present value. Round your answer to the nearest dollar.$ Is the project acceptable? The project is . What is the meaning of the computed net…
Monroe Printing is evaluating the pamphlet project. The project would require an initial investment of $73,300.00 that would be depreciated to $12,300.00 over 4 years using straight-line depreciation. The first annual operating cash flow of $18,000.00 is expected in 1 year, and annual operating cash flows of $18,000.00 are expected each year forever. Monroe Printing expects the project to have an after-tax terminal value of $108,700.00 in 3 years. The tax rate is 22.80%. What is X, the project's relevant expected cash flow for NPV analysis in year 3? $83,916.40 (plus or minus $10) $108,700.00 (plus or minus $10) $101,916.40 (plus or minus $10) $126,700.00 (plus or minus $10) None of the above is within $10 of the correct answer
Frieda Frost recently invested $3,125 in a project that is promising to return 10 percent per year. The cash flows are expected to be as follows: End of Year Cash Flow 1yr 597 2yr 527 3yr 540 4yr ???? 5yr 555 Note that the cash flow in year 4 is missing . Determine the Year 4 missing cash flow that will make the present value of this series equal to the amount Frieda invested ( that is , $ 3,125 )? Record your answer as a dollar amount rounded to 2 decimal places , but do not include a dollar sign or any commas in your answer . For example , enter $ 12,327.24987 as 12327.25 .

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