The florine mining company has constructed a town at

Reference no: EM13363935

The Florine Mining company has constructed a town at junilla, near the site of a rich mineral discovery in a remote part of australia. The town will be abandoned when mining operations cease after an estimated 10 years. the following estimates of investment costs, sales, and operating expense rate to the project to supply jungilla with meat and agricultural produce over the ten year period by developing nearby land.
a. investment in land is $2 million, farm buildings $400000, and farm equipment $800000. the land is expected to have a realisable value of $1 million in ten years' time. the building have an estimated useful life of 20 years, at which time their residual value would be zero, and they are to be depreciated on strangline basic. the residual value of the building after ten years is $100000. the farm equipment is to be depreciated on

a straight line basic.

b. investment of $500000 in current. will be covered at the end of the venture

c. annual cash sales are expected to be $6 million

d. anunual operating expenses are expected to be $4.4 million

e. assume tax is paid one year after the year of income is the project worht doing given that the after tax cost of capital is 10% pa. with a company tax rate of 30%?

Reference no: EM13363935

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