Question: A mining company has developed two alterative mine plans (Mine Plan A & Mine Plan B) for the potential exploitation of a gold deposit. While

A mining company has developed two alterative mine plans (Mine Plan $A \& Mine Plan B) for the potential exploitation of a gold$

A mining company has developed two alterative mine plans (Mine Plan A \& Mine Plan B) for the potential exploitation of a gold deposit. While both mine plans envisage a mine life of 5 years, the Gross Margin Cash Flows, Depreciation Schedule and CAPEX requirements of each are significantly different as shown in Tables 5.1 and 5.2. In both cases the company has a cost of equity capital of 12.00% pa. It intends to finance all CAPEX requirements using 50% equity and 50% debt. The debt will carry an interest rate of 8.00% pa and must be repaid as quickly as possible from any positive project cash flows. The company income tax rate over the life of the operation will be 30%. Complete the financial evaluation in the space provided in Tables 5.1 and 5.2 to ultimately provide a justfied recommendation regarding the most appropriate development option for this deposit (Mine Plan A or Mine Plan B). Table 5.2. Mine Plan B - Financial Evaluation

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