QUESTION A Bullock Gold Mining in Seth Bullock, the owner of Bullock Gold Mining. is evaluate ing a new gold mine in South Dakota. Dan Dority, the com- Year Cash Flow pany's geologist, has just finished his analysis of the mine $600,000,000 site. He has estimated that the mine would be productive for 75,000,000 eight years, after which the gold would be completely mined. 2 120,000,000 Dan has taken an estimate of the gold deposits to Alma 160,000,000 Garrett, the company's financial officer. Alma has been asked 130,000,000 by Seth to perform an analysis of the new mine and present 240,000,000 her recommendation on whether the company should open the new mine. 180,000,000 210,000,000 Alma has used the estimates provided by Dan to deter- mine the revenues that could be expected from the mine. She 90,000,000 has also projected the expense of opening the mine and the 95,000,000 annual operating expenses. If the company opens the mine. it will cost $600 million today, and it will have a cash outflow of QUESTIONS $95 million nine years from today in costs associated with clos- 1. Construct a spreadsheet to calculate the payback period, ing the mine and reclaiming the area surrounding it. The internal rate of return, modified internal rate of return. expected cash flows each year from the mine are shown in the and net present value of the proposed mine. table. Bullock Mining has a 12 percent required return on all of its gold mines. 2. Based on your analysis, should the company open the mine? Docume = 84. 1804 = - 13. 5834 22. 2977 Y = 8 . 7143 = 2.2482 X = 86.428 6 advertising in Problem 4: A r Foundations of B advertising and s Materials from Pr (X)spurestoyg IQUAN