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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. Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $850 million today, and it will have a
Year | Cash Flow |
0 | - $850.000.000 |
1 | 170.000.000 |
2 | 190.000.000 |
3 | 205.000.000 |
4 | 265.000.000 |
5 | 235.000.000 |
6 | 170.000.000 |
7 | 160.000.000 |
8 | 105,000.000 |
9 | - 75.000.000 |
2. Based on your analysis, should the company open the mine?
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- After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that could result in environmental damage. Before proceeding with the extraction, CTC must spend 900,000 for new mining equipment and pay 165,000 for its installation. The mined gold will net the firm an estimated 350,000 each year for the 5-year life of the vein. CTCs cost of capital is 14%. For the purposes of this problem, assume that the cash inflows occur at the end of the year. a. What are the projects NPV and IRR? b. Should this project be undertaken if environmental impacts were not a consideration? c. How should environmental effects be considered when evaluating this or any other project? How might these concepts affect the decision in part b?arrow_forwardSeth 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. Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $650 million today, and it will have a cash outflow of $72 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…arrow_forwardseth 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 compnay's financial officer alma has been asked by seth to perform an analysis of the new mine and present her recommendation on wheter the company should open the new mine. year cashflow 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 form the mine. she also has projected the expense of opening the mine and the annual operating expenses. if the company opens the mine, it…arrow_forward
- I need this in Excel Worksheet to show formulas and calculations please. 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 Flow0 −$625,000,0001 70,000,0002 129,000,0003 183,000,0004 235,000,0005 210,000,0006 164,000,0007 108,000,0008 86,000,0009 − 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…arrow_forwardBULLOCK GOLD MININGSeth 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. Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $750 million today, and it will have a cash outflow of $105 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows…arrow_forwardBullock 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. Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $745 million today, and it will have a cash outflow of $55 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows…arrow_forward
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