Question
An investor is considering an investment in a copper mine. The following information is available: A. The investment will generate an annual pre-tax profit of
An investor is considering an investment in a copper mine. The following information is available:
A. The investment will generate an annual pre-tax profit of $50,000 over 3 years. Costs for depreciation are included in the pre-tax profit.
B. Equipment costing $400,000 will be required immediately. The equipment will be straight line depreciated over 3 years, has a salvage value of $100,000 and is subject to normal tax rules for equipment.
C. The tax rate is 35%, and the CCA rate on equipment is 20%.
D. The investor is also considering a similar investment that will generate an after tax return of 10%.
What is the Net Present Value of this project and what qualitative factors should be considered in assessing this proposal?
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