2. Vellum Mines is trying to decide whether or not to purchase equipment to explore a mineral deposit located on land to which the firm has mineral rights. An analysis has been made and it is expected that the following cash flows would be associated with opening and operating a mine:

Cost of new equipment .. $275,000

Working capital required 100,000

Net annual cash receipts . 120,000

Cost to construct new roads in three years . 40,000

Salvage value of equipment in four years 65,000

Vellums management estimates that the mineral deposit will be exhausted after four years of mining. For tax purposes, the company computes depreciation deductions using the MACRS tables. The property is in the MACRS 3-year class. The working capital will be released at the end of the project. The companys after-tax minimum required rate of return is 12%. Assume a tax rate of 30%. What is the approximate after-tax net present value of the project?

a. ($3,732)

b. $98,866

c. ($47,290)

d. $19,079