Bullock Gold Mining
Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine.
Year | Cash Flow |
0 | −$625,000,000 |
1 | 70,000,000 |
2 | 129,000,000 |
3 | 183,000,000 |
4 | 235,000,000 |
5 | 210,000,000 |
6 | 164,000,000 |
7 | 108,000,000 |
8 | 86,000,000 |
9 | − 90,000,000 |
Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She also has projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $625 million today, and it will have a cash outflow of $90 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the nearby table. Bullock Gold Mining has a 12 percent required return on all of its gold mines.
QUESTIONS
Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine.
Based on your analysis, should the company open the mine?
Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback period. Write a VBA script that calculates the payback period for a project.
as per HomeworkLib policy please find below the answer of first 4 question.. for rest of question please raise new request..
Year | Cash Flow | Cumulative cash flow | PVIF @ 12% | Present value | ||
0 | ($625,000,000) | ($625,000,000) | 1 | (625,000,000) | ||
1 | 70,000,000 | ($555,000,000) | 0.892857143 | (495,535,714) | ||
2 | 129,000,000 | ($426,000,000) | 0.797193878 | (339,604,592) | ||
3 | 183,000,000 | ($243,000,000) | 0.711780248 | (172,962,600) | ||
4 | 235,000,000 | ($8,000,000) | 0.635518078 | (5,084,145) | ||
5 | 210,000,000 | $202,000,000 | 0.567426856 | 114,620,225 | ||
6 | 164,000,000 | $366,000,000 | 0.506631121 | 185,426,990 | ||
7 | 108,000,000 | $474,000,000 | 0.452349215 | 214,413,528 | ||
8 | 86,000,000 | $560,000,000 | 0.403883228 | 226,174,608 | ||
9 | -90,000,000 | $470,000,000 | 0.360610025 | 169,486,712 | ||
(728,064,988) | ||||||
Ans 1 | Payback period = | =4+8000000/210000000 | 4.04 | Year | ||
Ans 2 | IRR = | 15.32% | ||||
Ans 3 | MIRR = | 13.32% | ||||
Ans 4 | NPV = | (728,064,988) |
Bullock Gold Mining Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold...
Bullock Gold Mining C eth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company's financial officer. Alma has been asked by Seth to perform an...
Bullock Gold Mine Case Study Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform...
CHAPTER CASEBullock Gold Mining Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company's financial officer. Alma has been asked by Seth to perform an...
Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis of the new...
Bullock Gold Mining Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis...
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11% for the interst rate and reinvestment rate
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Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Den Dority.the compar's geologst. has just finishad his analysis of the mine site. He has estimated that the mine would be productive for eight years after whidh the gold would be completely minad Dan has taien an estimate of the gold depasits to Alma Garrett, the company's financial officer. Aima has been asked by Serh to perform an arysis of the new mine...