Renfree mines inc owns the mining rights to a large tract

Reference no: EM13572041

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	$	910,000
Annual net cash receipts	$	355,000*
Working capital required	$	250,000
Cost of road repairs in six years	$	71,000
Salvage value of equipment in eight years	$	120,000

*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.

The mineral deposit would be exhausted after eight years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 19%. (Ignore income taxes.)

Click here to view Exhibit 11B-1 and Exhibit 11B-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, other intermediate calculations and final answer to the nearest whole dollar.)

Net present value

Should the project be accepted?

	No
	Yes

Reference no: EM13572041

Questions Cloud

To save for her newborn sons college education lea wilson : to save for her newborn sons college education lea wilson will invest 1000 at the beginning of each year for the next

Calculate net present value for each project negative : wriston company has 300000 to invest. the company is trying to decide between two alternative uses of the funds. the

A baker had a certain number of boxes and a certain number : a baker had a certain number of boxes and a certain number of cakes with him. initially he distributed all the cakes

List the three ratios that combine to form the dupont : 1. list the three ratios that combine to form the dupont framework. also list the formulas used to compute each

Renfree mines inc owns the mining rights to a large tract : renfree mines inc. owns the mining rights to a large tract of land in a mountainous area. the tract contains a mineral

I need a descriptive essay which consists of 400 to 500 : i need a descriptive essay which consists of 400 to 500 words which is about a house or a famous city.

How many shares of common stock will be outstanding after : how many shares of common stock will be outstanding after thestocksplit? what is the new par value ofeach share of

A trader gives a discount of r and still makes a profit of : a trader gives a discount of r and still makes a profit of r. a second trader marks up his goods by r and gives a

The bakery estimates that it will cost 12000 per year to : doughboy bakery would like to buy a new machine for putting icing and other toppings on pastries. these are now put on

User Account

All Pages