Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $ 490,000 $ 175,000 $ 190,000* $ 55,000 $ 80,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 19%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the proposed mining project? Note: Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount. Net present value < Required A Required B > Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $ 490,000 $ 175,000 $ 190,000* $ 55,000 $ 80,000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth. The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 19%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the proposed mining project? Note: Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount. Net present value < Required A Required B >
Expert Answer:
Answer rating: 100% (QA)
Lets break down the calculation of the net present value NPV of the proposed mining project step by ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
Students also viewed these accounting questions
-
Defend the main FOUR (4) reasons why sea transport is widely adopted in international shipments with appropriate example?
-
Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been...
-
If r = (t, t 2 , t 3 ), find r(t) and r(t).
-
Research PCAOB auditing standards (which can be found on the PCAOB's website - www.pcaobus.org) related to the use of confirmations and document the specific requirements related to maintaining...
-
Blossom adheres to ASPE. Based on the above information, and using the direct method, the cash provided by (used in) operating activities to be reported on Blossom's 2023 statement of cash flows?...
-
Smart Manufacturing Systems Pty Ltds accountant recently prepared the following data from the companys accounting records for the year ended 30 June 2025. Required (a) Prepare a cost of goods...
-
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: Direct labor-hours required to support estimated production . . . . . . . ....
-
High ethical standards are essential in the Healthcare industry. These standards fall under the umbrella of health or medical ethics, the field of applied ethics that is concerned with moral...
-
Nestl: Integrating Marketing Communication into Daily Operations Nestl is a company that is over 150 years old. Todays world is fast paced. Digital marketing plays a big part in the ever-changing...
-
Understand the role of inequality, let us abstract from leisure and just consider consumption. The idea here is that a country with higher inequality will be "riskier" to live in for an average...
-
What have you found that is most interesting or surprising about the Explore/Exploit portfolio approach.
-
Explain what is meant by beta of a security, how its value can be estimated, and the factors likely to determine its value.
-
In the sport of baseball, batting average is calculated by dividing the number of hits a player achieves by the number of official at bats. The following table shows the batting performance for two...
-
A bank will return $2345 on a 10-yr certificate of deposit that originally cost $1000. What interest rate, compounded annually, is the bank paying? (ans % to two decimal places) Your Answer: Answer...
-
Explain leadership in sport coaching. Analyze bases of power in sport coaching in your own coaching. Describe specific coaching examples related to bases of power to influence athletes through...
-
Death and taxes are two (2) certainties that we can plan for in life. The IRS is still able to tax us in death using the estate tax rules as legislated by congress. For this paper, you will be...
-
Define deferred revenue. Why is it a liability?
-
You are working for Microsoft evaluating the possibility of selling energy drinks. Microsofts WACC is 8.1%. Energy drinks would be a new line of business for Microsoft, however, so the systematic...
-
Assume the following information about Johnson & Johnson (ticker: JNJ). JNJs equity beta is 0.60. The yield on 10-year treasuries is 3%, and you estimate the market risk premium to be 6%....
-
You and your best friend started a company 4 years ago. You each contributed $25,000 and each received 500,000 Series A preferred shares in the company. Since then, you have had the following funding...
Study smarter with the SolutionInn App