Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the c
ompany 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 $275,000
Working capital required $100,000
Annual net cash receipts $120,000
* Cost to construct new roads in year three $40,000
Salvage value of equipment in four years $65,000
*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.
The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company’s required rate of return is 20%.
Required:
Determine the net present value of the proposed mining project. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)
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 $275,000
Working capital required $100,000
Annual net cash receipts $120,000
* Cost to construct new roads in year three $40,000
Salvage value of equipment in four years $65,000
*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.
The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company’s required rate of return is 20%.
Required:
Determine the net present value of the proposed mining project. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).)
1 answer:
Answer: $7924. 5
Explanation:
Given the following :
Cost of new equipment and timbers - $275,000
Working capital required - $100,000
Annual net cash receipts - $120,000
Cost to construct new roads in year three - $40,000
Salvage value of equipment in four years - $65,000
Kindly check attached picture for Explanation
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Answer:
The question is not complete, below is the complete question:
Suppose that you open a mutual fund account with a deposit of 500 dollars. 5 months later, the fund balance is 600 dollars, and you withdraw 216 dollars. A year after the account was opened, your balance is X dollars. If the dollar weighted and time weighted rates of return were the same, what is the rate of return? (Assume simple interest for the dollar weighted calculation.) Answer should be a percent!!!
Answer:
The rate of return is 48% on deposited fund.
Explanation:
The rate of return on investment is the percentage increase on an amount invested for a particular period of time, and to calculate this, we will use the simple interest formula:
I = P × R × T
Where:
P = principal = $500
R = rate in decimal ( %rate/100)
T = time = 5 months = 5/12 years
I = interest = Principal - final balance = 600 - 500 = $100
∴ 100 = 500 × R/100 × 5/12
100 =
120,000 = 2500R
∴ R = 120,000 ÷ 2500 = 48%
Therefore rate of return (R) = 48%
For a clearer understanding of the concept of interests, let us calculate for the balance after one year (X) as shown below:
I = P×R×T
T = 1 because, X is the balance after one year.
I = 500 × 48/100 × 1
I = $240
therefore the final amount after one year = interest + principal
= 240 + 500 = 740
but we were told that $216 was withdrawn at 5 months, hence the balance after one year = 740 - 216 = $524