Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which thecompany has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows wouldbe associated with opening and operating a mine in the area:Cost of new equipment and timbersWorking capital requiredAnnual net cash receiptsCost to construct new roads in three yearsSalvage value of equipment in four years$ 320,000$ 195,000$ 130,000*$ 59,000$ 84,000*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 forreinvestment elsewhere. The company's required rate of return is 18%.Click here to view Exhibit 7B-1 and Exhibit 7B-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?

The net present value is a capital budgeting method which is determined by taking difference in…

Answered: Windhoek Mines, Limited, of Namibia, is…

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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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 $ 400,000 Working capital required $ 130,000 Annual net cash receipts $ 145,000*Footnote asterisk Cost to construct new roads in three years $ 46,000 Salvage value of equipment in four years $ 71,000 *Footnote asteriskReceipts 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 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: What is…
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. $ 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?
Highland Mining and Minerals Company is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,648,000 and will produce $338,000 per year in years 5 through 15 and $533,000 per year in years 16 through 25. The U.S. gold mine will cost $2,035,000 and will produce $275,000 per year for the next 25 years. The cost of capital is 12 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. Note: Do not round intermediate calculations and round your answers to 2 decimal places. The Australian mine The U.S. mine Net Present Value a-2. Which…
4.
For a 5-year tunnel digging project, 3 proposals are being considered for a tunnel boring machine. Proposal 1 from Hyundai of South Korea. First cost $20M, annual operating and maintenance cost $4M, salvage value $3M. Proposal 2 from Sumitomo of Japan. First cost $22M, annual O & M cost $ 3.5M, salvage value $3.5M. Proposal 3 from Asea Brown Boveri,ABB of Sweden. First cost $25M, annual O & M cost $3M, salvage value $5M. The company’s MARR is 30%. Which proposal is the best?
Highland Mining and Minerals Co. is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,627,000 and will produce $329,000 per year in years 5 through 15 and $518,000 per year in years 16 through 25. The U.S. gold mine will cost $2,042,000 and will produce $280,000 per year for the next 25 years. The cost of capital is 11 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. (Do not round intermediate calculations and round your answers to 2 decimal places.) The Australian mine The U.S. mine a-2. Which investment should be made?…
The net present value is incorrect I need help with this one.
Not use Ai and chatgpt please.
Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of $665,159. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing Mill Electric Shovel 1 $203,000 $254,000 2 181,000 235,000 3 181,000 217,000 4 144,000 223,000 5 110,000 6 91,000 7 79,000 8 79,000 The estimated residual value of the processing mill at the end of Year 4 is $250,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558…
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Highland and Minerals Company is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,648,000 and will produce $325,000 per year in years 5 through 15 and $523,000 per year in years 16 through 25. The U.S. gold mine will cost $2,047,000 and will produce $253,000 per year for the next 25 years. The cost of capital is 11 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. a-2. Which investment should be made? Australian mine U.S. mine b-1. Assume the Australian mine justifies an extra 2 percent premium over the normal cost of…

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