Please answer the following questions:BULLOCK GOLD MINING

Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, 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. Dan has taken

an estimate of the gold deposits to Alma Garrett, the company's financial officer. Alma has been asked by Seth to perform an analysis of the new mine and

present her recommendation on whether the company should open the new mine.

Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She also has projected the expense of

opening the mine and the annual operating expenses. If the company opens the mine, it will cost $$950$ million today, and it will have a cash outflow of $$75$

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 following table. Bullock Mining has a $12$ percent required return on all of its gold mines.

$1.$ Using a $12\%$ required rate of return, calculate the payback period, discounted payback

period, internal rate of return $($IRR$),$ profitability index, and net present value $($NPV$)$ of the

proposed mine. Assume a five$-$year payback requirement for the payback and discounted

payback methods.

a$.$ For each capital budgeting method, what is the interpretation and accept$/$reject

decision?

b$.$ For the IRR method, recalculate at a $10\%,11\%,13\%,$ and $14\%$ required rate of

return. How does the IRR change as the required return changes?

c$.$ For the IRR method, what may be a disadvantage of relying on it for this project?

d$.$ At what required rate of return and higher $($or lower$)$ does this project become

NPV positive?

e$.$ Using a financial calculator, calculate the interest rate $($I$/$Y$)$ if PV $=-950,$ FV $=$

$3,665\mathrm{.}7,$ and N $=9.$ What is the interpretation of this number?

$2.$ Based on your analysis, should the company open the mine?