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: $ 275,000 $ 100,000 $ 120,000* $ 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. Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years 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 accepted? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the proposed mining project? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value

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: $ 275,000 $ 100,000 $ 120,000* $ 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. Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years 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 accepted? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the proposed mining project? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 19P

See similar textbooks

Similar questions

i need help on this accounting 2102 question it has 2 parts
Vishnu
Problem 14-16 (Algo) 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. 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…
Q/find total Net cashflow after Таax The following offshore oil development project is being proposed. What would be your approach to address the opportunity ? Production Data : First Oil beginning of Year 3 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Annual Oil Production 5 15 15 10 2.5 1.0 0.5 Technical Costs Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Platform 30 30 Facilities 15 30 Tangible Drilling 10 15 10 4 Intangible Drilling 20 32 15 5 Fixed Opex 14 15 15 15 15 15 Variable Opex US$ 0.40/bbl produced Oil Price forecast : US$ 20/bbl, expected to remain constant thereafter : Royalty 25% Tax rate 20%, Tax losses not allowed Capital Allowance - Straight line at 25% p.a., Only start after First Oil production Terms and Conditions
11 pints Problem 12-16 (Algo) Net Present Value Analysis [LO12-2] 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 Salvage value of equipment in four years $ $ 310,000 190,000 $125,000 $ 58,000 $ 83,000 "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 128-1 and Exhibit 128-2. to determine the appropriate discount factor(s)…
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 feasibility
Asset Purchase Price BWP Inc. is considering the purchase of an asset. BWPs required rate of return on new assets is 12%. The expected net cash inflows generated by the new asset are as follows: Required: Given that the net cash inflows can be realized, what is the maximum amount BWP should be willing to pay for the new asset? If BWP pays that amount, at what amount should BWP recognize the asset on the balance sheet? Assume that each cash inflow occurs at the end of the year. (Contributed by Norma C. Powell)
Pls solve asap...
aa.2
S 2
Question 2: Boisjoly Product Company is considering two mutually exclusive investment projects. The projects' annual expected cash flows are as follows: Estimated Net Cash Flows (million $) Year Project X Project Y 0 (405) (300) 1 134 (387) 2 134 (193) 134 (100) 4 134 600 5 134 600 6 134 850 7 0 (180) (note: numbers in brackets are costs) Compute IRR for each project. If you were told that the company's cost of capital (and also MARR) was 15% per year, which project the company should select?
Exercise : Calculate Cash Flow The following offshore oil development project is being proposed. What would be your approach to address the opportunity ? Production Data : First Oil beginning of Year 3 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Annual Oil Production 5 15 15 10 2.5 1.0 0.5 Technical Costs Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Platform 30 30 Facilities 15 30 Tangible Drilling 10 15 10 4 Intangible Drilling 20 32 15 Fixed Opex 8 14 15 15 15 15 15 Variable Opex US$ 0.40/bbl produced Oil Price forecast : US$ 20/bbl, expected to remain constant thereafter Terms and Conditions : Royalty 25% Tax rate 20%, Tax losses not allowed Capital Allowance - Straight line at 25% p.a., Only start after First Oil production