Zambales Mines Inc. is contemplating the purchase of a piece of equipment to exploit a mineral deposit that is located on land which the company has mineral rights. based on an engineering and cost analysis, the following cash flows associated with opening and operating a mine in the area are expected. Cost of new equipment and timbers 2,750,000 Working capital required 1,000,000 Net annual cash receipts 1,200,000 Cost to construct new road in three years 400,000 Salvage value of equipment in 4 years 650,000 Net annual cash receipts : Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, etc. 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%. The net present value for the project is: (Show solution) b. P (79,303) d. P (204,688) c. P(561,553) a. P 454,620
Zambales Mines Inc. is contemplating the purchase of a piece of equipment to exploit a mineral deposit that is located on land which the company has mineral rights. based on an engineering and cost analysis, the following cash flows associated with opening and operating a mine in the area are expected.
Cost of new equipment and timbers 2,750,000
Working capital required 1,000,000
Net annual cash receipts 1,200,000
Cost to construct new road in three years 400,000
Salvage value of equipment in 4 years 650,000
Net annual cash receipts : Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, etc.
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%. The
b. P (79,303)
d. P (204,688)
c. P(561,553)
a. P 454,620
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