MINI CASE Ferdinand Gold Mining Rio Ferdinand, the owner of Ferdinand Gold Mining, is evalu- ating a new gold mine in Fort McMurray. Paul Pogba, 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. Paul has taken an estimate of the gold deposits to Julia Davids, the company's financial officer. Julia has been asked by Rio to perform an analysis of the new mine and present her recom- mendation on whether the company should open the new mine. Julia has used the estimates provided by Paul to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the an- nual 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 mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table. Ferdinand Mining has a 12 percent required return on all of its gold mines. 1. 2. 75,000,000 Year Cash Flow 0 -$600,000,000 1 2 120,000,000 3 160,000,000 4 210,000,000 5 240,000,000 6 160,000,000 7 130,000,000 8 90,000,000 9 -95,000,000 Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine. Based on your analysis, should the company open the mine?