A mining company is offered a 9-year lease for a coal mine at a cost of P120M. The engineers estimate the company will be able to mine 15 000 tons/yr for the first four years and 22 500 tons/yr for the next five years. Operating costs is computed at P1250/ton, while the price of coal is P2750/ton. If the company requires a 12% minimum rate of return on its investment, determine if the offer should be considered Apply PW analysis. (Ans. Offer should be accepted, P25.66M)

A mining company is offered a 9-year lease for a coal mine at a cost of P120M. The engineers estimate the company will be able to mine 15 000 tons/yr for the first four years and 22 500 tons/yr for the next five years. Operating costs is computed at P1250/ton, while the price of coal is P2750/ton. If the company requires a 12% minimum rate of return on its investment, determine if the offer should be considered Apply PW analysis. (Ans. Offer should be accepted, P25.66M)

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...

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