Check my workWindhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit onland to which the company has mineral rights. An engineering and cost analysis has been made, and it isexpected that the following cash flows would be associated with opening and operating a mine in the area:Cost of new equipment and timbersWorking capital requiredAnnual net cash receiptsCost to construct new roads in year threeSalvage value of equipment in four years$ 410,000$ 135,000S 150,000*$ 47,000S 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 bereleased 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 value of the proposed mining project?b. Should the project be accepted?< Prev8 of 11Next >A D O G 1a立

The following calculations are done for Windhoek Mines Limited.

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 $ 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 value of the proposed mining project? b. Should the project be accepted?

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 $ 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 value of the proposed mining project? b. Should the project be accepted?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1MAD: San Lucas Corporation is considering investment in robotic machinery based upon the following...

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San Lucas Corporation is considering investment in robotic machinery based upon the following estimates: a. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 700,000. Use the present value tables appearing in Exhibits 2 and 5 of this chapter. b. Determine the net present value of the equipment, assuming a desired rate of return of 10% and annual net cash flows of 500,000, 700,000, and 900,000. Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Determine the minimum annual net cash flow necessary to generate a positive net present value, assuming a desired rate of return of 10%. Round to the nearest dollar. d. Interpret the results of parts (a), (b), and (c).
The management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?
Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual net cash flows: a. Compute the expected value of the annual net cash flows. b. Determine the expected net present value of the equipment, assuming a desired rate of return of 10% and the expected annual net cash flows computed in part (a). Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Based on your results in parts (a) and (b), should San Lucas Corporation invest in the equipment?
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 $ 300,000 Working capital required $ 185,000 Annual net cash receipts $ 120,000 * Cost to construct new roads in year three $ 57,000 Salvage value of equipment in four years $ 82,000 *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:…
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 $ 420,000 Working capital required $ 230,000 Annual net cash receipts $ 165,000 * Cost to construct new roads in year three $ 66,000 Salvage value of equipment in four years $ 91,000 *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.…
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 $ 275,000 Working capital required $ 100,000 Annual net cash receipts $ 120,000 * Cost to construct new roads in year three $ 40,000 Salvage value of equipment in four years $ 65,000 *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 20%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.…
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 $ 500,000 Working capital required $ 180,000 Annual net cash receipts $ 195,000 * Cost to construct new roads in year three $ 56,000 Salvage value of equipment in four years $ 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%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. What is…
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 $ 310,000 Working capital required $ 190,000 Annual net cash receipts $ 125,000 * Cost to construct new roads in year three $ 58,000 Salvage value of equipment in four years $ 83,000 *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 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required:…
Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineraldeposit 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 inthe area:Cost of new equipment and timbers .............................................. R275,000Working capital required ................................................................ R100,000Annual net cash receipts ............................................................... R120,000*Cost to construct new roads in three years ................................... R40,000Salvage value of equipment in four years ..................................... R65,000*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities,insurance, and so forth.The currency in Namibia is the rand, denoted here by R.The mineral deposit would be exhausted after four years of mining. At…
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 $ 420,000 Working capital required $ 230,000 Annual net cash receipts $ 165,000* Cost to construct new roads in three years $ 66,000 Salvage value of equipment in four years $ 91,000 *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%. Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. EXHIBIT 14B-2Present Value of an Annuity of $1…
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 $ 370,000 Working capital required $ 115,000 Annual net cash receipts $ 130,000* Cost to construct new roads in three years $ 43,000 Salvage value of equipment in four years $ 68,000 *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…
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 $ 380,000 Working capital required $ 120,000 Annual net cash receipts $ 135,000* Cost to construct new roads in three years $ 44,000 Salvage value of equipment in four years $ 69,000 *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%. a. What is the net present value of the proposed mining project? b. Should the project be accepted?