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The following information is available. In Years 1 to 5, sales will be 390 tons of coal per week, at a selling price of
The following information is available. In Years 1 to 5, sales will be 390 tons of coal per week, at a selling price of $60 per ton. In Years 1 to 5, the expected running costs (including depreciation) are expected to be $19 000 per week. On the last day of Year 5, the land and equipment will be sold for $500 000. The land and equipment will be worked for 50 weeks in a year. Required: . (4) Calculate the net cash flow for each of the five years of the project. (11 points) (5) Calculate the net profit for each of the five years of the project. (2 points) (6) Calculate the net present value for the project. (4 points) Mega Coal ple is also appraising the project using the internal rate of return method. Using a discount rate of 10%, the accountant has calculated a net present value of $39 300. The company has a target discounted cash flow return of 15%. Required: (7) Calculate, correct to two decimal places, the internal rate of return. (4points) (8) Evaluate the project for Mega Coal plc, using the calculations made above and any relevant non-financial factors. (6 points)
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