Question: James has used the estimates provided by Greg to determine the revenues that could be expected from the mine. He has also projected the expense
James has used the estimates provided by Greg to determine the revenues that could be expected from the mine. He has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $720 million today. The expected cash flows each year from the mine are shown in the table below. Cavedale Silver Mining has a 13 percent return on all its silver mines.
Year Cash Flow
| CF0 | -$720,000,000 |
| CF1 | $110,000,000 |
| CF2 | $169,000,000 |
| CF3 | $201,000,000 |
| CF4 | $205,000,000 |
| CF5 | $200,000,000 |
| CF6 | $150,000,000 |
| CF7 | $100,000,000 |
- Calculate the payback period, internal rate of return, net present value, and the profitability index of the proposed mine.
- Based on the analysis, should the company open the mine?
detailed calculations please
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