Bullock Gold Mining

Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist,

has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold

would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company's 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 and the annual operating expenses. If the company opens the mine, it will cost $$825$ million today, and it will

have a cash outflow of $$75$ million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it$.$

The expected cash flows each year from the mine are shown in the following table. Bullock Mining has a $12$ percent required return on all

of its gold mines.

Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, profitability index, and

net present value of the proposed mine.

Based on your analysis, should the company open the mine?

Bonus question: Most spreadsheets do not have a built$-$in formula to calculate the payback period. Write a VBA script that calculates

the payback period for a project.