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help with this question, please use excel and show all functions minimum acceptable rate of return is 15%. we haul road improvement should be made
help with this question, please use excel and show all functions
minimum acceptable rate of return is 15%. we haul road improvement should be made toda 00,000 tons. rate of return analysis to determ ve woul 4-18 Improvement to a mine haul road is being considered to shorten the over- all haul distance and reduce truck cycle times, thereby increasing the total number of cycles per day. The cost of the improvements is estimated to be $6,000,000 at time zero. Currently, the trucks make 16 cycles per day from the mine pit to a crushing facility which, given the truck perfor- mance, capacities and haul distance, translates into 2,000,000 tons of ore being hauled each year. If the road improvement is made, the number of cycles is anticipated to increase by 25% to 20 cycles per day which trans- lates into an additional 500,000 tons of annual production from the mine. Total mine reserves are estimated to be 14,000,000 tons. If the haul road improvement is made, the life of the mine will be shortened from seven to six years due to the accelerated production schedule. With the modified haul road, total production in years one through five would be 2,500,000 tons per year with year six production totaling 1,500,000 tons at which time the reserves would be depleted. For each alternative, the average ore grade is 0.09 ounces per ton with a 0.85 recovery rate. The average selling price is $350.00 per ounce while the operating costs are $190.00 per ounce beginning in year 1. The minimum acceptable rate of return is 15.0%. For this acceleration problem, use rate of return analysis to determine if the haul road improvement can be economically justified. Then verify your findings with a net present value analysisStep by Step Solution
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