Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Give answers according to the question. Step by step answers. I need manual calculations. Please help with my assignment. Robin Jackson, the owner of Galaxy

image text in transcribed

Give answers according to the question. Step by step answers. I need manual calculations.

Please help with my assignment.

Robin Jackson, the owner of Galaxy Mining, is evaluating a new gold mine in North China. Robert Wilson, 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. Robert has taken an estimate of the gold deposits to Sharon Garrett, the company's financial officer. Sharon has been asked by Robin to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine. Sharon has used the estimates provided by Robert to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $600 million today and it will have a cash outflow of $95 million nine years from today in costs associated with closing the mining and reclaiming the area surrounding it. The plant has projected net income of $1.5 million for the first four years, $2 million in year 5 and 6,$2.5 million in year 7 to 9 . The average book value for the plant is $60 million. The expected cash flows each year from the mine are shown in the table. Galaxy Mining has a 12% required return on all its gold mines. Required: a) Critically evaluate the appraisal method of the proposed mine as mentioned below. i. Net present value ii. Payback period iii. Internal rate return (IRRR) iv. Profitability Index v. Average Accounting Return (AAR) vi. Modified Internal Rate Return (MIRR) (30 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Emerald Handbook On Cryptoassets Investment Opportunities And Challenges

Authors: H. Kent Baker, Hugo Benedetti, Ehsan Nikbakht, Sean Stein Smith

1st Edition

1804553212, 978-1804553213

More Books

Students also viewed these Finance questions

Question

What is the role of the Joint Commission in health care?

Answered: 1 week ago