Windhoek Mines, Limited, 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$ 440,000Working capital required$ 150,000Annual net cash receipts$ 165,000*Cost to construct new roads in three years$ 50,000Salvage value of equipment in four years$ 75,000

*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 companys required rate of return is 18%.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

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.)

Required:

a. What is the net present value of the proposed mining project?

b. Should the project be accepted?

Question 4 In three years, when he is discharged from the Air Force, Steve wants to buy a $25,000 power boat.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required:

What lump-sum amount must Steve invest now to have the $25,000 at the end of three years if he can invest money at: (Round your final answer to the nearest whole dollar amount.)