2. Seth Bullock the owner of bullock Gold Mining, is evaluating a new gold mine in south Dakota. Dan Dority , the companys geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for three years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to alma Garrett, the companys financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine.

Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She also has projected the expense of opening the mine with two different alternatives.

Initial Investment	Alternative 1	Alternative 2
Initial Investment 1 2 3	$150000 10,400 5,900 2,100	$19000 12,700 6,100 5,300

Required:

a. Suppose the companys payback period cutoff is two years . Which of these two projects should be chosen?

b. suppose the company uses the NPV rule to rank these two projects . Which project should be chosen if the appropriate discount rate is 10 % and the PV factors as follows 0.893, 0.792, 0.712.