Question: An engineer for a mining company is called upon to examine a mining property that is for sale and to advise his employer regarding its

An engineer for a mining company is called upon to examine a mining property that is for sale and to advise his employer regarding its value. He estimates the “ore insight” to be 440,000 tons and will base his value on this figure. The existing facilities will permit the removal of about 55,000 tons of ore per year. He
estimates that the mining, transportation, and smelting cost will total about P5.75 per ton of ore and that the gross income per ton mined will be P11.75.
Administrative expenses will be an addition of P30,000 per year. What will be the value of the mine to yield a 15% annual return on investment throughout
its life and to provide in addition for reinvestment of earnings at 4% so that the original capital investment will be intact at the end of the life of the mine?

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