Reference no: EM131182571
NPV and IRR Analysis
After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environmental damage. Before proceeding with the extraction, CTC must spend $900,000 for new mining equipment and pay $165,000 for its installation. The gold mined will net the firm an estimated $350,000 each year over the 5-year life of the vein. CTC's cost of capital is 14%. For the purposes of this problem, assume that the cash inflows occur at the end of the year.
What is the project's NPV? Round your answer to the nearest dollar.
$
What is the project's IRR? Round your answer to two decimal places.
%
Should this project be undertaken if environmental impacts were not a consideration?
-Select-Yes No Item
How should environmental effects be considered when evaluating this, or any other, project?
-Select-Item
I. Environmental effects should be treated as sunk costs.
II. Environmental effects could be added by estimating penalties or any other cash outflows that might be imposed on the firm to help return the land to its previous state (if possible).
III. Environmental effects should be ignored since they would have no effect on the project's profitability.
|
Analyzing the cost of debt for a firm
: You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 7.0 percent coupon bonds are selling at a price of $653.03. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answ..
|
|
Calculate the annual payment on the loan
: Golf Course installing a new Automatic Sprinkler System The eighteen-hole Redwood Golf Course is in need of a new sprinkler system, which is estimated to cost $1 million. Calculate the annual payment on the loan. Calculate the payback period on the p..
|
|
What are the expected cash collections in months
: Here is a forecast of sales by National Bromide for the first 4 months of 2015 (figures in thousands of dollars): Month: 1 2 3 4 Cash sales 23 32 26 22 Credit sales 140 160 130 110 On average, 50% of credit sales are paid for in the current month, 30..
|
|
Investments has larger future
: Which of the following investments has a larger future? value: A? $100 investment earning? 10% per year for 5 years or a? $100 investment earning? 5% per year for 10? years?
|
|
NPV and IRR Analysis
: After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environm..
|
|
Present value of five minus-year ordinary annuity
: Which is? greater, the present value of a fiveminus−year ordinary annuity of? $300 discounted at? 10%, or the present value of a fiveminus−year ordinary annuity of? $300 discounted at? 0% that has its first cash flow six years from? today
|
|
What is the price today for bond from this? issue
: Twenty years ago JeffCo Inc. issued thirtyminus−year ?9% annual coupon bonds with a? $1,000 face value each. Since? then, interest rates in general have risen and the yield to maturity on the? firm's bonds is now? 11%. Given this? information, what i..
|
|
What is the standard deviation of the stock returns
: You find a certain stock that had returns of 12 percent, −19 percent, 25 percent, and 13 percent for four of the last five years. The average return of the stock over this period was 10.2 percent. What was the stock’s return for the missing year? Wha..
|
|
The total manufacturing costs for firm
: Two firms, C and D, both produce coat hangers. The price of coat hangers is $1.20 each. Firm C has total fixed costs of $750,000 and variable costs of 30 cents per coat hanger. Firm D has total fixed costs of $400,000 and variable costs of 50 cents p..
|