Solution-Case study-resnik gold mining

Case study-resnik gold mining

Assignment Help Finance Basics

Reference no: EM133115274

Mini Case Resnik Gold Mining

John Resnik, the owner of Resnik Gold Mining, is evaluating a new gold mine in South Dakota. Mike Golder, the company's geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Mike has taken an estimate of the gold deposits to Stephine Luke, the company's financial officer. Stephine has been asked by John to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine.

Stephine has used the estimates provided by Mike to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $745 million today, and it will have a cash outflow of $55 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table. Resnik Mining has a required return of 12 percent on all of its gold mines.

Year	Cash flow
0	$ (745,000,000)
1	$127,000,000
2	$135,000,000
3	$145,000,000
4	$185,000,000
5	$225,000,000
6	$165,000,000
7	$155,000,000
8	$134,000,000
9	$ (55,000,000)

QUESTIONS

Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine.
Based on your analysis, should the company open the mine?

Reference no: EM133115274

Questions Cloud

Importance of corporate governance in an organisation : 1. Discuss the importance of corporate governance in an organisation.

Determine the value of the investment today : Determine the value of the investment today and the interest component earned on this investment.

Prepare an absorption costing income statement : Prepare, in good form, an absorption costing income statement and a variable costing income statement for the year ended December 31, 2018

Assess the company cash needs : The company sells 90% of its products on credit, and 10% are cash sales. The credit sales are collected as follows: 60% in the following month, 20% two months l

Case study-resnik gold mining : John Resnik, the owner of Resnik Gold Mining, is evaluating a new gold mine in South Dakota. Mike Golder, the company's geologist, has just finished his analysi

You would take to ensure compliance : What are at least two ways that you would take to ensure compliance? Explain why you chose the resources you did and their value to small businesses.

What the budgeted number of direct labor hours for the year : The predetermined overhead rate for the year was $18.56 per direct labor hour. What the budgeted number of direct labor hours for the year

What are the factors affected to palm oil industry : a. What are the factors affected to palm oil industry and make a trader to enter the derivatives market to protect themselves?

Signs of organizational culture : The text presents five signs of organizational culture: mission statement, stories and language, physical layout, rules and policies, and rituals.

User Account

All Pages

Case study-resnik gold mining

Reference no: EM133115274

Reference no: EM133115274

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT