11pintsProblem 12-16 (Algo) Net Present Value Analysis [LO12-2]Windhoek Mines, Limited, of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which thecompany has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows wouldbe associated with opening and operating a mine in the area:Cost of new equipment and timbersWorking capital requiredAnnual net cash receiptsCost to construct new roads in three yearsSalvage value of equipment in four years$$ 310,000190,000$125,000$ 58,000$ 83,000"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 forreinvestment elsewhere. The company's required rate of return is 18%Click here to view Exhibit 128-1 and Exhibit 128-2. 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?

Net Present Value (NPV) is determined by taking difference in present value of cash outflows from…

Problem 12-16 (Algo) Net Present Value Analysis [LO12-2] 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 Working capital required Annual net cash receipts $ 310,000 $ 190,000 $ 125,000 $50,000 $ 83,000 Cost to construct new roads in three years Salvage value of equipment in four years "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 company's required rate of return is 18% Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factors) using tables Required: & What is the net present value of the proposed mining project? b. Should the project be accepted?

Problem 12-16 (Algo) Net Present Value Analysis [LO12-2] 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 Working capital required Annual net cash receipts $ 310,000 $ 190,000 $ 125,000 $50,000 $ 83,000 Cost to construct new roads in three years Salvage value of equipment in four years "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 company's required rate of return is 18% Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factors) using tables Required: & What is the net present value of the proposed mining project? b. Should the project be accepted?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 19P

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