MolyCorp Case Part 1

Net Present Value Analysis Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: The mineral deposit would be exhausted after four years of mining. At that point, the working capital would he released for reinvestment elsewhere. The company’s required rate of return is 20%. Required: What is the net present value of the proposed mining project? Should the project be accepted? Explain.

Evaluate the discovery – you need to calculate the total worth, worth to the company, government take, value in terms of entitlement interest and working interest. Field Size  1.4 Tcf Production/Reserve Ratio  7% of the original field size starting producing year 3 Gas Price   $3.5/Mcf CapEx $1/Mcf capitalized in 5 years, straight-line depreciation Operating Cost  $0.8/Mcf Royalty  10% Government Take  40% Cost recovery limit   60% of gross revenue Discount Rate   10% Income Tax Rate   33%

Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (CS stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$67.7 million and annual operating expenses of C$19.44 million Maritime expects that over a five-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal cash flow. Maritime uses straight-line depreciation, has a 21.07% corporate tax rate, and has a(n) 11.1% cost of capital. a. Calculate the periodic cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project.…

Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.3 million and annual operating expenses of C$19.37 million. Maritime expects that over a five-year operating life it can recover 175,000 ounces of gold from the mine and that the project will have no terminal cash flow. Maritime uses straight-line depreciation, has a 21.03% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the periodic cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project.…

Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.4 million and annual operating expenses of C$19.43 million. Maritime expects that over a 5-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.06% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project.

Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.4 million and annual operating expenses of C$19.43 million. Maritime expects that over a 5-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.06% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project. e.…

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ssignment Question : XZ Company is medium sized metal fabricator that is currently contemplating two projects: Project A require an initial investment of $ 50,000, Project B require an initial investment of $ 55,000. Assume the NZ Company has a 10% cost of capital and the relevant cash flows for the two projects are presented in the table below: Project Project A Project B Initial Investment 50,000 55,000 Year Operating Cash Flow 1 18000 33000 2 18000 16000 3 18000 14000 4 18000 14000 5 18000 14000 Require: Calculate the NPV for Project A and B? Based on your NPV findings in section (a) which project will you recommend for NZ Company? Based on your answer in section (b) justify your recommendation?

In this assignment you will need to perform an analysis on a hypothetical discovery based on the following information: Field Size 1.4 Tcf Production/Reserve Ratio 7% of the original field size starting producing year 3 Gas Price $3.5/Mcf CapEx $1/Mcf capitalized in 5 years, straight-line depreciation Operating Cost $0.8/Mcf Royalty 10% Government Take 40% Cost recovery limit 60% of gross revenue Discount Rate 10% Income Tax Rate 33% Allow cost recovery carry forward 1. Evaluate the discovery – you need to calculate the total worth, worth to the company, government take, value in terms of entitlement interest and working interest. 2. Evaluate the producing gas reserve – total worth, worth to the company, government take, value in terms of entitlement interest and working interest.

The management of Bongani Wholesalers are considering two mutually exclusive investment projects. The following data are available for each project:                                                                                             Project A                            Project B             Disc Factor                                                                                           N$                                        N$ Cost of plant and equipment                                      90 000                                 60 000 Salvage value                                                                 nil                                         nil Expected cash flows:                                                    Year 1                                                                               55 000                                 27 500                  0,909 Year 2                                                                               12…

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Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts $ 430,000 $ 215,000 $ 150,000* Cost to construct new roads in three years Salvage value of equipment in four years $ 63,000 $ 88,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Answer is complete but not entirely correct. Complete…

Vikrambhai

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Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $ 500,000 $ 180,000 $ 195,000* $ 56,000 $ 81,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 22%. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted?

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Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $ 330,000 $ 200,000 $ 135,000* $ 60,000 $ 85,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the…

Check my work Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in year three Salvage value of equipment in four years $ 410,000 $ 135,000 S 150,000* $ 47,000 S 72,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present…

Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers $ 400,000 Working capital required $ 130,000 Annual net cash receipts $ 145,000*Footnote asterisk Cost to construct new roads in three years $ 46,000 Salvage value of equipment in four years $ 71,000 *Footnote asteriskReceipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: What is…

Deep Mines Ltd. of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Net annual cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $280,000 95,000 130,000* 50,000 50,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth. It is estimated that the mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's discount rate is 20%. Click here to view Exhibit 10-1 and Exhibit 10-2. to determine the appropriate discount factor(s) using tables. Required: 1-a. Determine the NPV of the proposed…

Kivi Service Stations is considering expanding its operations to include the greater Dubuque area. Rather than build new service stations in the Dubuque area, management plans to acquire existing service stations and convert them into Kivi Outlets. Kivi is evaluating two similar acquisition opportunities. Information relating to each of these service stations is presented below: Estimated normal rate of return on net assets Joe's Garage 20% $950,000 Gas N' Go Fair value of net identifiable assets Actual average net income for past five years b. Compute an estimated fair value for any goodwill associated with Kivi purchasing Gas N' Go. Base your computation upon an assumption that Kivi's management expects excess earnings to continue for four years. $220,000 20% $980,000 $275,000

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Réquired intormation [The following information applies to the questions displayed below.] Project A requires a $320,000 initial investment for new machinery with a five-year life and a salvage value of $30,500. The company uses straight-line depreciation. Project A is expected to yield annual net income of $29,700 per year for the next five years. Compute Project A's accounting rate of return. Accounting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return Accounting rate of return

Terminal cash​ flow / Need Excel Formulas:  Looner Industries is currently analyzing the purchase of a new machine that costs $161,000 and requires $19,700in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $29,800to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a​ five-year recovery period​ for the applicable depreciation​ percentages) and expects to sell the machine to net $10,100before taxes at the end of its usable life. The firm is subject to a 21% tax rate. a. Calculate the terminal cash flow for a usable life of ​ (1) three​ years, (2) five​ years, and​ (3) seven years. b. Discuss the effect of usable life on terminal cash flows using your findings in part a. c. Assuming a​ five-year usable​ life, calculate the terminal cash flow if the machine were sold to net​ (1) $9,035or​ (2) $170,200 ​(before taxes) at the end of five years. d. Discuss the effect of sale price…

c. Sabuni Itd is considering expanding its operation by acquiring a new plant in Mombasa. The cost of the plant is 50 million. The new plant is expected to generate the following projected cash flows for a period of 5 years. Year 1 3 Cash 15,000,000 18,000,000 20,000,000 25,000,000 35,00,000 flows Required: Using NPV technique, advise the company on whether to acquire the plant if the discount rate is 10% LERO)

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Integrative: Complete Investment decision Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.26 million. This outlay would be partially offset by the sale of an existing press. The old press has zero book value, cost $0.92 million 10 years ago, and can be sold currently for $1.15 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.66 million higher than with the existing press, but product costs (excluding depreciation) will represent 54% of sales. The new press will not affect the firm's net working capital requirements. The new press will be depreciated under MACRS using a five-year recovery period. The firm is subject to a 40% tax rate. Wells Printing's cost of capital is 11.3%. (Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6.) a. Determine the initial cash flow required by the new press. b.…