Windhoek Mines Ltd. of Namibia is contemplating the purchase of equipment to exploit a mineral deposit located 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....................................R206,250
Working capital required............................................................75,000
Net annual cash receipts............................................................90,000*
Cost to construct new roads in three years.............................30,000
Salvage value of equipment in four years................................48,750

It is estimated that 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 discount rate is 20%.

Required:

Determine the NPV of the proposed mining project. Should the project be accepted? Explain.