Rio Ferinand, the owner of Ferdinand Gold Mining, is evaluating a new gold mine in Fort...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Rio Ferinand, the owner of Ferdinand Gold Mining, is evaluating a new gold mine in Fort McMurray. Paul Pogba, 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. Year Cash Flow -$550,000,000 63,000,000 85,000,000 120,000,000 145,000,000 175,000,000 120,000,000 95,000,000 75,000,000 -70,000,000 1 2 3 4 5 6 7 8 9. Paul has taken an estimate of the gold deposits to Julia Davids, the company's financial officer. Julia must perform an analysis of the new mine and present her recommendation on whether the company should open the new mine. Julia has used Paul's estimate to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and annual operating expenses. If the company opens the mine, it will cost $550 million today, and it will have a cash outflow of 70 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 mine are shown in the table. Ferdinand Mining has a 11% required return on all its gold mines. Julia needs to calculate the payback period, internal rate of return (IRR), and net present value (NPV) of the proposed mine to perform the analysis. Rio Ferinand, the owner of Ferdinand Gold Mining, is evaluating a new gold mine in Fort McMurray. Paul Pogba, 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. Year Cash Flow -$550,000,000 63,000,000 85,000,000 120,000,000 145,000,000 175,000,000 120,000,000 95,000,000 75,000,000 -70,000,000 1 2 3 4 5 6 7 8 9. Paul has taken an estimate of the gold deposits to Julia Davids, the company's financial officer. Julia must perform an analysis of the new mine and present her recommendation on whether the company should open the new mine. Julia has used Paul's estimate to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and annual operating expenses. If the company opens the mine, it will cost $550 million today, and it will have a cash outflow of 70 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 mine are shown in the table. Ferdinand Mining has a 11% required return on all its gold mines. Julia needs to calculate the payback period, internal rate of return (IRR), and net present value (NPV) of the proposed mine to perform the analysis.
Expert Answer:
Answer rating: 100% (QA)
A D E Simple cumulative cash 238 Year Cash flows PVIF11 Present ... View the full answer
Related Book For
Finance for Executives Managing for Value Creation
ISBN: 978-0538751346
4th edition
Authors: Gabriel Hawawini, Claude Viallet
Posted Date:
Students also viewed these general management questions
-
An insurance company is evaluating a new software system designed to reduce the time for claims processing. The fixed costs with the new system are $120,000 per year. The average variable costs with...
-
The Great Eastern Toys Company is evaluating a new product. The cash flows that are expected from this product over its five years expected life are shown be- low. Note that the final years cash flow...
-
The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales...
-
In Problems 2734, the given pattern continues. Write down the nth term of a sequence {a n } suggested by the pattern. 2 1 1 ,3,-, 5, 7 6 ....: 8
-
(a) What factors should a venture capitalist consider when deciding whether to invest in a peer-to-peer technology firm? (b) What factors should a film company take into account when deciding whether...
-
When isopropylidenecyclohexane is treated with strong acid at room temperature, isomerization occurs by the mechanism shown below to yield 1-iso- propylcyclohexenc: At equilibrium, the product...
-
Repeat Example 7.3 using \(10 \mathrm{~kg} / \mathrm{h}\) of solvent in each stage. Data From Example 7.3:- The feed of Example 7.2 is extracted three times with pure chloroform at 298 K, using 8...
-
Krauss Leasing Company signs a lease agreement on January 1, 2011, to lease electronic equipment to Stewart Company. The term of the non-cancelable lease is 2 years, and payments are required at the...
-
Vanessa went to Florida and purchased a laptop for US$920.00 by converting his Canadian money at an exchange rate of C$1 = US$0.9254. After a month, he returned to Vancouver but the exchange rate...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
The name of the company selected is Apple Inc. The product selected is TV, since Apple doesn't have a TV. The name of the TV is iTV. Answer the following questions: 1. What is the recommended...
-
How can your instructor expect you to figure out nursing diagnoses before you even see the patient or talk with him? 3. How does knowing the patient's medical diagnoses help you determine possible...
-
Determine the deflection at point C of the beam as shown. EI is constant. Note: tc/B is the moment of the M/El diagram between C and B about the point C. 10m B 60 kN 5 m
-
c. Intergenerational inequality and inequality in earnings between members of a population are positively correlated. Discuss two reasons that may explain this positive correlation. [max words: 250]...
-
Using the circuit below, answer the following questions. 1. Clearly state the Maximum Power Transfer Theorem. 2. Calculate the value of R3 for maximum power transfer. 3. Calculate the maximum power...
-
what is a firm's appropriate response to natural disasters? Reading: Idea Watch. 2018. "Giving After Disasters: When Corporate Aid Has the Most Impact." Harvard Business Review. And Rosegrant, S. and...
-
Put together a single page poster that consists of two parts. In Part 1, present a time management matrix that displays your Page 2 of 4 current time usage and allocation on different tasks. In Part...
-
What is a manufacturing system?
-
The Clampton Company is considering the purchase of a new machine to perform operations currently being performed on different, less efficient equipment. The purchase price is $110,000, delivered and...
-
a. The finance manager of a U.S. pharmaceutical company has $10 million to invest for six months. The annual interest rate in the United States is 3 percent. The annual interest rate in the United...
-
Mergecandor Corp. is considering the acquisition of Tenderon Inc. Mergecandor has 2 million shares outstanding selling at $30, or 7.5 times its earnings per share, and Tenderon has 1 million shares...
-
For the Lyman series, what is the wavelength of the line with the second longest wavelength? Would it be visible to the human eye?
-
In 1924 French theorist Louis de Broglie (1892 1987, Nobel laureate in physics 1929) proposed that matter has a wavelike nature expressed by \(\lambda=\frac{h}{m v}\). Show that his relation agrees...
-
This problem presents an example of the Correspondence Principle. Suppose that the electron in hydrogen is traveling in a circular orbit with quantum number \(n\) and makes a transition to \(n+1\),...
Study smarter with the SolutionInn App