REVISED Bullock Gold Mining per PROFESSOR MORRISON

Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the companys geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for 13 years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the companys 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.

0	($678,000,000)
1	$71,000,000
2	$129,000,000
3	$123,000,000
4	($100,000,000)
5	$410,000,000
6	$364,000,000
7	$117,000,000
8	$86,000,000
9	$186,000,000
10	$25,000,000
11	$15,000,000
12	$27,000,000
13	($117,000,000)

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 along with a maintenance and ventilation upgrade in year 4. Bullock Gold Mining has a 13.50% required return on all of its gold mines.

Questions:

A.The Payback Period

B.The AAR, Average Accounting Return

C.The NPV, Net Present Value

D.The IRR, Internal Rate of Return

E.The MIRR, Modified Internal Rate of Return, if both the finance rate and reinvestment rate are 12%

F.And what would be the profitability index on this project

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