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

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Answer 1

Question

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

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Answer 2

Question

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

Expert Solution & Answer

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Answer 3

Question

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

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 4

Question

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

Expert Solution & Answer

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Answer 5

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

Answer 6

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

Answer 7

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

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 9.1 - Prob. 9.1ACQ Ch. 9.1 - Prob. 9.1BCQ Ch. 9.2 - Prob. 9.2ACQ Ch. 9.2 - Why do we say that the payback period is, in a...Ch. 9.3 - Prob. 9.3ACQ Ch. 9.3 - What advantage(s) does the discounted payback have...Ch. 9.4 - What is an average accounting rate of return...Ch. 9.4 - What are the weaknesses of the AAR rule?Ch. 9.5 - Prob. 9.5ACQ Ch. 9.5 - Is it generally true that an advantage of the IRR...

Solution Summary: The author explains the calculation of payback period, IRR, MIRR and NPV of the estimated mine.

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Chapter 9 Solutions