Q1. (6 marks) Sally Yu, the owner of Yu Gold Mining, is evaluating a new gold mine in Tanzania. Barry Bain, 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. Barry has taken an estimate of the gold deposits to Andy Marshall, the company's chief financial officer. Andy has been asked by Sally to perform an analysis of the new mine and provide his recommendation on whether the company should open the new mine, Andy has used estimates provided to Barry to determine the revenues that could be expected from the mine. He has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine it will cost $500 million today, and will have a cash outflow of S80 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table below. Yu Gold Mining has a Beta of 2.0. the risk free rate is 2% and the market return is 8%. Year Cash flow ($ million) 0 1 -500 60 90 2 3 170 4 230 5 205 6 140 110 7 8 70 9 80 a) (5 marks) Calculate the payback period internal rate of return, and net present value of the proposed mine. b) (1 marks) Based on your analysis, should the company open the mine