Meadow view mines is contemplating the purchase of

Reference no: EM13575364

Meadow View Mines 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 297,000

Working capital required 90,000

Net annual cash receipts 120,000

Cost to construct new roads in three years 60,000

Salvage value of equipment in four years 80,000

It is estimated that 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 10%. Ignore income tax effects.

Required: Determine the net present value of the proposed mining project. Should the project be accepted?

Reference no: EM13575364

Questions Cloud

Anderson systems is considering a project that has the : anderson systems is considering a project that has the following cash flow and wacc data. what is the projects npv?

From the first e-activity the article indicates : from the first e-activity the article indicates approximately 90 of the companies in the study were sensitive to the

Your parents will retire in 30 years they currently have : your parents will retire in 30 years. they currently have 280000 and they think they will need 1550000 at retirement.

Company manufactures and distributes two products r and s : company manufactures and distributes two products r and s. overhead costs are currently allocated using the number of

Meadow view mines is contemplating the purchase of : meadow view mines is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company

It will generate 524000 in annual sales variable costs are : cost of project is 1.23 million. the cost will be depreciated straight line over 20 years. it will generate 524000 in

Each product may be sold at split-off or processed further : bowman company produces products c j and r from a joint production process. each product may be sold at split-off or

Traditional product costing systems eg job and process : which of the following statements is true regarding the potential effects of using reported product costs for decision

Lewis schultz and nobel development corp has an after-tax : lewis schultz and nobel development corp. has an after-tax cost of debt of 6.3 percent. with a tax rate of 30 percent

User Account

All Pages