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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Answer 1

Question

Chapter 9, Problem 2M

Summary Introduction

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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Answer 2

Question

Chapter 9, Problem 2M

Summary Introduction

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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Answer 3

Question

Chapter 9, Problem 2M

Summary Introduction

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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Answer 4

Question

Chapter 9, Problem 2M

Summary Introduction

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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Answer 5

Chapter 9, Problem 2M

Summary Introduction

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.

Answer 6

Chapter 9, Problem 2M

Summary Introduction

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.

Answer 7

Chapter 9, Problem 2M

Summary Introduction

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.

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 payback period for a new gold mine in State SD, and the NPV, which is positive.

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Chapter 9 Solutions