Case synopsis: Company S, who is the owner of Gold Mining B, is assessing a new gold mine in State SD. Person D, the geologist of the company, has completed his analysis of the mine site. He has projected that the mine will be productive for eight years, after that the gold will be completely 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 mine, 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 discuss: Whether the company must open the gold mine. Additional information computed from the previous question: The payback period is $4.39 years. The first IRR is $15.52% and the second IRR is also $15.52%. The MIRR is $13.55%, profitability index is $1.13, and the NPV is $70,701,975.12.

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Chapter 9, Problem 2M

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Case synopsis:

Company S, who is the owner of Gold Mining B, is assessing a new gold mine in State SD. Person D, the geologist of the company, has completed his analysis of the mine site. He has projected that the mine will be productive for eight years, after that the gold will be completely 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 mine, 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 discuss: Whether the company must open the gold mine.

Additional information computed from the previous question:

The payback period is $4.39 years. The first IRR is $15.52% and the second IRR is also $15.52%. The MIRR is $13.55%, profitability index is $1.13, and the NPV is $70,701,975.12.

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