Case synopsis: Company S, who is the owner of Gold Mining B, is assessing a new goldmine in State SD. Person D, the geologist of the company, has completed his analysis on the mine site. He has projected that the mine will be productive for eight years, after that the gold will be fully mined. Person D has taken an estimate of the gold deposits to Person A, the financial officer of the company. He is estimating whether the company must open the new mine. Person A has projected that if the company opens the new goldmine, then it would cost $525 million at present, and it would have a cash outflow of $35 million at the ninth year from the present. Adequate information: The estimate of Person A also includes the estimates of Person D to identify the income from the gold mine. To construct: A spreadsheet to compute the payback period, IRR ( Internal rate of return ), MIRR (Modified internal rate of return), and NPV ( Net present value ) of the estimated mine
Case synopsis: Company S, who is the owner of Gold Mining B, is assessing a new goldmine in State SD. Person D, the geologist of the company, has completed his analysis on the mine site. He has projected that the mine will be productive for eight years, after that the gold will be fully mined. Person D has taken an estimate of the gold deposits to Person A, the financial officer of the company. He is estimating whether the company must open the new mine. Person A has projected that if the company opens the new goldmine, then it would cost $525 million at present, and it would have a cash outflow of $35 million at the ninth year from the present. Adequate information: The estimate of Person A also includes the estimates of Person D to identify the income from the gold mine. To construct: A spreadsheet to compute the payback period, IRR ( Internal rate of return ), MIRR (Modified internal rate of return), and NPV ( Net present value ) of the estimated mine
Solution Summary: The author explains the calculation of payback period, IRR, MIRR and NPV of the estimated mine.
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.
Chapter 9, Problem 1M
Summary Introduction
Case synopsis:
Company S, who is the owner of Gold Mining B, is assessing a new goldmine in State SD. Person D, the geologist of the company, has completed his analysis on the mine site. He has projected that the mine will be productive for eight years, after that the gold will be fully mined. Person D has taken an estimate of the gold deposits to Person A, the financial officer of the company. He is estimating whether the company must open the new mine.
Person A has projected that if the company opens the new goldmine, then it would cost $525 million at present, and it would have a cash outflow of $35 million at the ninth year from the present.
Adequate information:
The estimate of Person A also includes the estimates of Person D to identify the income from the gold mine.
To construct: A spreadsheet to compute the payback period, IRR (Internal rate of return), MIRR (Modified internal rate of return), and NPV (Net present value) of the estimated mine
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor