Question
A company is considering investing $2,000,000 in a mining operation. The company thinks that another $1,000,000 will be required in working capital to get the
A company is considering investing $2,000,000 in a mining operation. The company thinks that another $1,000,000 will be required in working capital to get the mine operational. The company also believes that $500,000 of the woring capital will be released at the end of the 5 year functional life of the mine. The company also thinks that $1,500,000 will need to be spent at the end of the project to restore the landscape to it's "pre-mine" condition. The company expects cash flows from the mine to be (in years 1-5, respectively) $750,000, $2,500,000, $2,000,000, $1,500,000 and $1,000,000. The company's required rate of return on investments of this nature is 15%. Should the company accept this project or not? Please show your computations.
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