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	$	390,000
Working capital required	$	125,000
Annual net cash receipts	$	140,000	*
Cost to construct new roads in year three	$	45,000
Salvage value of equipment in four years	$	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 companys 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?

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

EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arrears: 1 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 1.886 1.859 1.833 1.808 1783 1759 1736 1713 1.690 1.668 1647 1.626 1.605 1.585 1.566 1.547 1528 1509 1.492 1474 1.457 1.440 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2.074 2042 2011 1981 1952 4 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.1993.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 7 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 8 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 7.435 7108 6.802 6.515 6.247 5.995 5.759 5537 5328 5132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 10 8.111 7722 7360 7024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 11 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4.177 4.035 3.902 3.776 3.656 12 9 .385 8.863 8.384 7.943 7.536 71616.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 13 9 .986 9.394 8.853 8.358 7.904 7.487 7.103 6.750 6.424 6.1225.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 3.912 3.780 14 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4265 4.108 3.962 3.824 15 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 16 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5668 5.405 5162 4.938 4730 4.536 4.357 4.189 4.033 3.887 17 12.166 11.274 10.477 9.763 9.122 8.544 8.022 75497120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 18 12.659 11.690 10.828 10.059 9.372 8.756 8.2017.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4080 3.928 19 1 3.134 12.085 11.158 10.336 9.604 8.950 8.365 7.8397.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7469 7025 6.623 6.259 5.929 5.628 5.353 5.101 4.870 4.657 4.460 4.279 4.110 3.954 21 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 22 14.451 13.163 12.042 11.061 10.2019.442 8.7728.176 7.645 7170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4.130 3.970 14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7718 7230 6.792 6.399 6.044 5723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 24 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7784 7283 6.835 6.434 6.073 5746 5.451 5.182 4.937 4.713 4.507 4.318 4143 3.981 25 15.622 14.094 12.783 11.654 10.675 9.8239.077 8.422 7.843 7330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4.147 3.985 26 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4151 3.988 27 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 3.990 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 29 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4.743 4.531 4.337 4.159 3.994 30 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4339 4.160 3.995 40 19.793 17.159 15.046 13.332 11.925 10.757 9779 8.951 8.244 7634 7105 6.642 6.233 5.871 5.548 5.258 4.997 4760 4.544 4.347 4166 3.999 EXHIBIT 12B-1 Present Value of $1; 1 | Periods 4% 5% 6% % 8% 9% 10% 118 12% 3% 14% 5% 16% 17% 18% 19% 20% 2% 22% 23% 24% 25% 1 0962 0952 0.943 0935 0926 0.97 0909 0901 0893 0885 0.87 0870 0862 0855 0847 0840 0.833 0826 0820 0.83 0806 0800 2 0 925 0.907 0890 0873 0.857 0.842 0826 0812 0.797 0.783 0769 0.756 0.743 0731 0718 0706 0.694 0.683 0672 0.661 0.650 0.640 10.889 0.864 0.840 0.816 0.794 0.72 0.751 0.731 0.72 0.693 0.675 0.658 0.641 0624 0609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 4 0855 0823 0792 0763 0735 0.708 0683 0659 0636 0613 0592 0572 0552 0534 0516 0.499 0.482 0467 0.451 0437 0423 0.410 5 0822 0.784 0.747 0.713 0.681 0.650 0621 0.593 0567 0.543 0519 0.497 0476 0.456 0437 0419 0.402 0386 0.370 0.355 0.341 0328 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0507 0480 0456 0432 0410 0.390 0370 0352 0.335 0319 0.303 0.289 0.275 0.262 7 0760 0711 0665 0623 0583 0.547 0513 0482 0452 0425 0400 0376 0354 0333 0314 0296 0279 0.263 0249 0235 0222 0210 18 10731 0.67 0627 0582 0.540 0.502 0.467 0434 0404 0376 0.351 0.327 0305 0285 0.266 0.249 0233 0.218 0.204 0191 0.179 0168 9 0703 0645 0.592 0.544 0.500 0460 0424 0.391 0361 0333 0.308 0284 0263 0243 0225 0209 0194 0.180 0167 0.155 0.144 0134 | 10 0676 0614 0558 0508 0.463 0422 0.386 0352 0322 0295 0270 0247 0227 0208 0191 0176 0162 0.149 0137 0126 0116 0107 1 0650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0287 0261 0237 025 0195 0178 0162 0148 0.135 0.123 012 0103 0094 0.086 2 0.625 0.557 0.497 0.44 0.397 0.356 0.319 0.286 0.257 0231 0.208 0187 0168 0152 037 0.124 0.112 0.102 0.092 0.083 0.076 0.069 3 0601 0530 0469 0415 0.368 0.326 0.290 0.258 0229 0204 0182 0163 0145 0130 016 0.104 0.093 0.084 0.075 0.068 0.061 0055 057 0.505 0.442 0388 0340 0.299 0.263 0.232 0205 0181 0160 0141 0125 01 009 0088 0078 0.069 0.062 0.055 0049 0.04 5 0.555 0.481 0.417 0.362 0315 0275 0.239 0.209 0183 0160 0140 0123 0108 0.095 0.084 0.074 0.065 0.057 0.051 0045 0.040 0.035 16 0534 0458 0394 0.339 0.292 0.252 0.218 0188 0163 0141 0123 0107 0093 0.081 0071 0.062 0.054 0047 0.042 0.036 0.032 0.028 1 0513 0436 0371 0.37 0270 0.231 0198 0170 0146 0125 0108 0093 0.080 0069 0060 0.052 0045 0039 0034 0.030 0026 0023 18 0494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 011 0.095 0.081 0069 0.059 0051 0.044 0.038 0.032 0.028 0.024 0.021 0.018 19 0475 0.396 0331 0.27 0.232 0194 0.164 0138 0116 0.098 0.083 0.070 0.060 0051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 20 0456 037 0312 0.258 0.215 0178 0.149 0124 0104 0.087 0073 0061 0051 0043 0037 0031 0.026 0022 0.019 0016 0014 0012 | 0439 0.359 0.294 0.242 0199 0164 0135 0112 0093 007 0064 0053 0044 0037 0031 0026 0022 0.018 0015 0013 001 0009 22 | 0422 0.342 0278 0.226 0.184 0150 0123 0101 0.083 0.068 0056 0.046 0038 0032 0026 0022 0.018 0.05 0.013 0.01 0.009 0.007 23 0406 0326 0262 0211 0170 0138 012 0.091 0074 0060 0049 0040 0033 0027 0022 0.018 0.015 0.012 0010 0009 0007 0.006 24 0390 0.310 0247 0197 0158 0126 0.102 0.082 0.066 0.053 0043 0035 0.028 0023 0019 0.05 0.013 0.010 0.008 0.007 0.006 0.005 10375 0295 0.233 0184 0.146 016 0.092 0074 0.059 0047 0.038 0030 0.024 0020 0016 0.013 0010 0.009 0.007 0.006 0.005 0.004 26 0361 0.281 0220 0.172 0135 0.106 0.084 0.066 0.053 0.042 0033 0026 0021 007 004 0011 0.009 0.007 0.006 0.005 0.004 0.003 27 0347 0268 0207 0161 0125 0098 0076 0060 0047 0037 0029 0023 008 0014 0011 0.009 0007 0006 0.005 0004 0003 0.002 28 0333 0.255 0196 0.150 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.06 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002 29 0.321 0.243 0185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0022 007 0.014 0.01 0008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 | 30 0.308 0.231 0174 0.131 0.099 0075 0.057 0.044 0033 0026 0020 0.05 0012 0009 0007 0.005 0.004 0.003 0.003 0.002 0.002 0001 40 0208 0142 0.097 0.067 0.046 0032 0.022 005 0.011 0.008 0.005 0.004 0.003 0002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000