Problem 12-16 Net Present Value Analysis [LO12-2] Windhoek Mines, Ltd. of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit 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 Working capital required Annual net cash receipts Cost to construct new roads in year three Salvage value of equipment in four years $ 390,000 $ 125,000 $ 140,000 $ 45,000 $ 70,000 "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth 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 required rate of return is 21%. Click here to view Exhibit 128-1 and Exhibit 120.2. to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Check m 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 required rate of return is 21%. Click here to view Exhibit 12B-1 and Exhibit 128-2 to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of the proposed mining project? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Required B > 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 required rate of return is 21%. Click here to view Exhibit 12B-1 and Exhibit 12B-2. to determine the appropriate discount factor(s) using tables. Required: a. What is the net present value of the proposed mining project? b. Should the project be accepted? Complete this question by entering your answers in the tabs below. Required A Required Should the project be accepted? Yes ONO Click here to view Exhibit 12B-1 and Exhibit 128 2. to determine the appropriate discount factor(s) using tables. Required: 1. What is the net present value of the cash flows associated with the purchase alternative? 2 What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the net present value of the cash flows associated with the lease alternative? (Round your final answer to the nearest whole dollar amount. Enter negative amount with a minus sign) Net present value Click here to view Exhibit 128-1 and Exhibit 12B-2 to determine the appropriate discount factor(s) using tables Required: 1. What is the net present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Which alternative should the company accept? Purchase alternative Lease alternative
