Deep Mines Ltd. of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located 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 Net annual cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $256,000 89,000 118,000* 44,000 50,000 "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth. It is estimated that 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 discount rate is 20%. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1-a. Determine the NPV of the proposed mining project. (Negative amount should be indicated with a minus sign. Round discount factor(s) to 3 decimal places. Round other intermediate calculations and final answer to the nearest whole number.) Net present value

Deep Mines Ltd. of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located 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 Net annual cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $256,000 89,000 118,000* 44,000 50,000 "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth. It is estimated that 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 discount rate is 20%. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1-a. Determine the NPV of the proposed mining project. (Negative amount should be indicated with a minus sign. Round discount factor(s) to 3 decimal places. Round other intermediate calculations and final answer to the nearest whole number.) Net present value

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: You are considering building a small house for rent as an investment. The land costs $9,000, the…

A: Considering building a small house for rent as an investment. The project has a 10-year lifespan,…

Q: Two types of power converters are under consideration for a specific application. An economic…

A: The formula for calculating the EAC is:EAC = P + A - F(A/P, i, N)Where:P = First cost (present…

Q: $8000 $4000(1 + 0.15)t- 1 $6000(1 0.3)t ere A(t) stands for the net cash flow in period t and S(t)…

A: Solution Net inflow jn year 1 A(1) = $8000 - $4000 (1+0.15)1-1 = $4000 In year 2 A(2) = $8000 -…

Q: Three industrial mowers are being evaluated by a company that provides lawn care service. At the end…

A: The objective of the question is to determine the most economical choice among the three mowers…

Q: Profitability Index A project has an initial cost of $40,000, expected net cash inflows of $12,000…

A: Hence the answer

Q: Residual Income = $23000 Operating income = 49,998 Cost of Capital = 12% What is return on…

A: Operating income=49998Cost of capital=12%Residual income=23000

Q: project is estimated to cost P100, 000, last ars and have a P10, 000 salvage value. The nual gross…

A: Comparable yearly expense is the annual expense of buying and keeping not entirely settled by…

Q: Here are the data for an asset that is being considered: Initial cost=$35,000 Salvage value at 5…

A: The internal rate of return refers to the metric used in financial analysis to estimate the…

Q: The Briggs and Stratton Commercial Division designs and manufacturers small engines for golf turf…

A: The company will be indifferent between the Pull system and the Push system if the Present Worth…

Q: breakeven

A: The breakeven point is a financial concept that represents the extent of income or business activity…

Q: Required information A process for producing the mosquito repellant Deet has an initial investment…

A: Breakeven production happens when total revenue equals total costs, bringing about neither profit…

Q: Arlington Company is constructing a building. Construction began on January 1 and was completed on…

A: Step 1: Calculate the interest expense for each note.Interest expense on $2,000,000 note =…

Q: help please answer in text form with proper workings and explanation for each and every part and…

A: Step 1:Time period n= 2 yearsStep 2:Step 3:Step 4:

Q: Question 1 A design firm is considering multiple independent projects for the upcoming quarter. For…

A: Present worth will help to understand the future investment or a project can yeild in terms of…

Q: Problem 06.010 Annual worth and capital recovery calculations U.S. Steel is considering a plant…

Q: 11) What is the present worth of an independent project that requires initial investment of $50 000…

A: present value, also known as present discounted value, is the value of an expected income stream…

Q: Describe the process of determining the equivalent annual worth of the project and the unit profit…

A: Present value: The term present value refers to the current value of all future cash inflow or cash…

Q: Your company presently uses a crew of its own employees for all major maintenance. On average, 44…

A: Introduction Production is the organised activity of transforming resources into finished products…

Q: The annual fixed costs for a given factory are $150,000, the variable cost is $30 per unit and the…

A: here we calculate unit should be made to have an annual profit of $25000 and choose the correct…

Q: A steam generation system at a biomass-fueled power plant uses an electrostatic precipitator (ESP)…

A: MARR is the minimum rate of return or discount rate that a company or investor requires as…

Question

Deep Mines Ltd. of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located 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
Net annual cash receipts
Cost to construct new roads in three years
Salvage value of equipment in four years
"Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth.
It is estimated that 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 discount rate is 20%.
Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables.
$256,000
89,000
118,000*
44,000
50,000
Required:
1-a. Determine the NPV of the proposed mining project (Negative amount should be indicated with a minus sign. Round discount
factor(s) to 3 decimal places. Round other intermediate calculations and final answer to the nearest whole number.)
Net present value
S

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Meaning of net present value

VIEW

Step 2: Computation of net present value

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

None
The first cost of any property includes: the original purchase price and freight and transportation charges installation expenses initial taxes and permits fee all of the above
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash Accounts receivable Inventory Buildings and equipment, net Accounts payable Common shares Retained earnings a. The gross margin is 25% of sales. b. Actual and budgeted sales data are as follows: March (actual) April May June $50,000 $60,000 $72,000 $ 8,000 20,000 36,000 120,000 21,750 150,000 12,250 July $90,000 $48,000 c. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are the result of March credit sales. d. Each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. e. One-half of a month's inventory purchases is paid for in the month of purchase; the other one-half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory. f. Monthly expenses are as follows:…
If the profit function for selling smart phone screen magnifier is -4500p2 + 561500p – 11898000, what is the maximum profit that can be expected from selling smart phone screen magnifiers? Question 1 options: $ 0, no profit $ 5,617,681 $ 1,717,764 -$ 8,004,171
Subject: Engineering Economics Need Step by step solution within 30 minutes.
Note: the answer should be typed.