Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Deep Mines Ltd. Of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral
Deep Mines Ltd. Of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers: $276000 Working capital required Net annual cash receipts. \$94000 Net annual cash receipt: $128000 Cost to construct new roads in three : $49000 Salvage value of equipment in four years : $50000 *Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth. It is estimated that the mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's discount rate is 20%. Required: 1. Determine the NPV of the proposed mining project. (Negative amount should be indicated with a minus sign. Round discount factor(s) to 3 decimal places. Round other intermediate calculations and final answer to the nearest whole number
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started