ezto.mheducation.com Cards: Econ 312 Farley Final | Quizlet Accounting exam 2 em

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ezto.mheducation.com Cards: Econ 312 Farley Final | Quizlet Accounting exam 2 emmie.hearne@gmail.com- Gmail 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: Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral depost Cost of new equipment and timbers Working capital required Annual net cash receipts Cost to construct new roads in three years Salvage value of equipment in four years $ 320,000 S 195,000 $ 130,000* 59,000 84,000 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 Investment elsewhere. The company's required rate of return is 18%. Click here to view Exhibit 138-1 and Exhibit 138-2, to determine the appropriate discount factor(s) using tables. Required a. Determine the net present value of the proposed mining project. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s)-.) Purchase of equipment Working capital investment Annual net cash receipts Road construction Working capital released Salvage value of equipment Total cash flows Discount factor (18%) Present value Net present value : F2 F3 F5 F8

Explanation / Answer

now                       1                       2                       3                       4 purchase of equipment (320,000.00) working capital investment (195,000.00) annual net cash receipts    130,000.00    130,000.00    130,000.00    130,000.00 road contruction    (59,000.00) working capital released    195,000.00 salvage value of equipment      84,000.00 total cashflow (515,000.00)    130,000.00    130,000.00      71,000.00    409,000.00 DF                  1.00            0.8475            0.7182            0.6086            0.5158 PV (515,000.00)    110,168.50      93,363.40      43,212.73    210,954.02 NPV     (57,301.35)

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