Chapter 9 Net Present Value and Other Investment Criteria MINICASE Bullock Gold Mining Seth Bullock, the owner of Bullock Gold Mining, is evaluat Year Cash Flow ing a new gold mine in South Dakota. Dan Dority, the com- -$635,000,000 puny's geologist, has just finished his analysis of the mine 89,000.000 site. He has estimated that the mine would be productive for 105,000,000 eight years, after which the gold would be completely mined. B WN 130.000,000 Dan has taken an estimate of the gold deposits to Alma Gar- rett, the company's financial officer. Alma has been asked by 173,000,000 Seth to perform an analysis of the new mine and present her 205,000,000 recommendation on whether the company should open the 155,000,000 new mine. 145,000,000 Alma has used the estimates provided by Dan to determine 122,000,000 the revenues that could be expected from the mine. She has 45.000,000 also projected the expense of opening the mine and the an- qual operating expenses. If the company opens the mine, it will cost $635 million today, and it will have a cash outflow QUESTIONS of $45 million nine years from today in costs associated with 1. Construct a spreadsheet to calculate the payback period. closing the mine and reclaiming the area surrounding it. The internal rate of return, modified internal rate of return, and expected cash flows each year from the mine are shown in the net present value of the proposed mine. table. Bullock Mining has a required return of 12 percent on all of its gold mines. 2. Based on your analysis, should the company open the mine? 3. 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