Reference no: EM13753975
Renfree Mines, Inc., owns the mining rights to a large tract of land in a mountainous area. The tract contains a mineral deposit that the company believes might be commercially attractive to mine and sell. 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 equipment required $ 850,000
Annual net cash receipts $ 285,000*
Working capital required $ 215,000
Cost of road repairs in two years $ 64,000
Salvage value of equipment in ten years $ 150,000
*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.
The mineral deposit would be exhausted after ten years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company’s required rate of return is 15%. (Ignore income taxes.)
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.
Required:
a. Determine the net present value of the proposed mining project. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Net present value $
b. Should the project be accepted?
No
Yes
|
Prepare the journal entry to record income tax expense
: Wise Company began operations at the beginning of 20x1. The following information pertains to this company. Gross profit on construction contracts using the percentage- of- completion method per books amounts to $92,000. Gross profit on construction ..
|
|
Sales-production-direct material and direct labor
: Based on the information provided prepare the following operating budgets for 2015: Sales, Production, Direct Material, Direct Labor, Manufacturing Overhead, Ending Inventory, Cost of Goods Sold, Selling, General and Administrative Budgets, and a Bud..
|
|
Amended and consequently created a past service cost
: J.J. Heva Company is an American company that prepares its financial statements under US GAAP. In 2014, the company reported income of $5,000,000 wit stockholders’ equity of $40,000,000 on December 31, 2014. In anticipation of possible adoption of IF..
|
|
What are the annual net cash inflows
: Doughboy Bakery would like to buy a new machine for putting icing and other toppings on pastries. These are now put on by hand. The machine that the bakery is considering costs $94,000 new. It would last the bakery for ten years but would require a $..
|
|
Determine the net present value of proposed mining project
: Renfree Mines, Inc., owns the mining rights to a large tract of land in a mountainous area. The tract contains a mineral deposit that the company believes might be commercially attractive to mine and sell. Determine the net present value of the propo..
|
|
Interest revenue or interest expense associated with loan
: Parent loaned $200 to Sub. To keep things simple, assume that there is no interest revenue or interest expense associated with this loan. Parent made a sale to Sub for $300 cash. The inventory had originally cost Parent $220. Sub then sold that same ..
|
|
Using effective-interest amortization
: A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using effective-interest amortization, how much interest expense will be recogn..
|
|
How much interest expense was incurred
: View the 2013 Annual Report for the Ford Motor Company, a Fortune 50 company, linked here as well as on the Course Information page. What was the gross profit for 2013? For 2012? How much interest expense was incurred in 2013? In 2012? What were the ..
|
|
What is the journal entry for the conversion
: What is the journal entry for the conversion of $1,500,000 of bonds into 12 shares of common stock (with no par value) for each $1,000 of bonds? How is the related discount on bonds payable recorded?
|