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statuscvo [17]
3 years ago
11

Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota, Dan Dority, the company’s geologi

st, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company’s financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendations an whether the company should open the new mine.
Year Cash Flow

0 -$650,000,000
1 80,000,000
2 121,000,000
3 162,000,000
4 221,000,000
5 210,000,000
6 154,000,000
7 108,000,000
8 86,000,000
9 -72,000,000

Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost S650 million today, and it will have a cash outflow of S72 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table on this page. Bullock Gold Mining has a 12 percent required return on all of its gold mines.

Required:
Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine.
Business
1 answer:
boyakko [2]3 years ago
4 0

Answer:

NPV is $28.5 million

Payback is 4.31 years

IRR is 13.25%

MIRR is 12.51%

Explanation:

The NPV,payback period,Internal rate of return and modified internal rate of return were computed in the attached spreadsheet.

Payback period=the year of the first positive cumulative cash flow+the year cumulative cash flow/the next year cash flow

the year of first positive cumulative flow is year 4

the cumulative cash flow for year 4 is $66 m

the next year cash flow is(year 5) is $210

payback=4.31

Download xlsx
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Chicken and tuna fish are substitutes in consumption. Suppose that new technology decreases the cost of catching tuna. This woul
mihalych1998 [28]

Answer:

B. a decrease; a decrease

Explanation:

Substitutes' goods are products that can be consumed in place of each other.  If one product is missing, consumers will be ready and willing to buy its substitute. An increase or fall in the price of a good or services will cause the demand for its substitute to move in the opposite direction.

Equilibrium quantity is when supply matches the demand. If the price of Tuna fish decreases, its demand will increase as more customers will afford it. Tuna and chicken are substitutes, should the price of Tuna decrease,  customers will prefer to consume Tuna over chicken.  Consequently, the demand for chicken will reduce w leading to a decrease in its price.

6 0
3 years ago
An asset has had an arithmetic return of 10.3 percent and a geometric return of 8.3 percent over the last 90 years. What return
Art [367]

Answer:

Blume's formula combines the geometric and arithmetic means of an asset to be able to predict its returns in a given period.

The formula is;

<em>= Geometric Mean*(T-1)/(N-1) + Arithmatic Mean *(N-T)/(N-1) </em>

Where;

T = Period in question

N = Total period

10 years

= 8.3%*(10-1)/(90-1) + 10.3%*(90-10)/(90-1)

= 10.1 %

25 years

= 8.3%*(25-1)/(90-1) + 10.3%*(90-25)/(90-1)

= 9.76%

30 years

= 8.3%*(30-1)/(90-1) + 10.3%*(90-30)/(90-1)

= 9.65%

4 0
3 years ago
Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $74, and the book value per sha
GaryK [48]

Answer:

10.45%

Explanation:

First find the cost of equity for the company

RE = [$4.60*(1.05) / $74] + 0.05

RE = 0.1153, or 11.53%

Then find the YTM on both bond issues

P1 = $950 = $45*PVIFA(R%,48) + $1,000*PVIF(R%,48)

R = 4.767%

YTM = 4.767%×2

YTM = 9.53%

P2 = $1,080 = $50*PVIFA(R%,16) + $1,000*PVIF(R%,16)

R = 4.298%

YTM = 4.298%×2

YTM = 8.60%

Total Debt = 0.95($80,000,000) + 1.08*($60,000,000)

Total Debt = $140,800,000

Weight of D1 = 76,000,000 / 140,800,000

Weight of D1 = 0.5398

Weight of D2 = 64,800,000 / 140,800,000

Weight of D2 = 0.4602

Weighted Average after-tax cost of debt

RD = (1 – 0.35)*[(0.5398)*(0.0953) + (0.4602)(0.086)]

RD = .0592, or 5.92%

Market value of equity = 8,000,000*($74) = $592,000,000

Market value of debt = $140,800,000

Total market value of the company = $592,000,000 + 140,800,000 = $732,800,000

Weights of equity and debt

E/V = $592,000,000 / $732,800,000 = 0.8079

D/V = 1−E/V = 0.1921

WACC = 0.8079(0.1153) + 0.1921(0.0592)

WACC = 0.1045, or 10.45%

7 0
3 years ago
Eastport Inc. was organized on June 5, 2018. It was authorized to issue 300,000 shares of $10 par common stock and 50,000 shares
exis [7]

Answer:

A) Cash (debit) 180,000; Common stock (credit) 150,000; Additional paid-up capital-common stock (credit) 30,000 - Debit - Credit = 0

B) Cash (debit) 255,000; Preferred stock (credit) 250,000; Additional paid-up capital-preferred stock (credit) 5,000 - Debit - Credit = 0

C) Cash (debit) 900,000; Common stock (credit) 600,000; Additional paid-up capital-common stock (credit) 300,000 - Debit - Credit = 0

Explanation:

In Eastport Inc.´s case all 3 situations are similar, shares (Stockholders´Equity) increased, so credits in 4 accounts, according to the type of shares that are issued, must be registered: Common stock, Preferred stock, Additional paid-up capital-common stock, Additional paid-up capital- preferred stock. We will recognize the par value and stated value of the shares and the difference between this and the price paid by shareholders will be recognized as additional paid-up capital. Also, cash (Asset) is received as payment for the shares so a debit must be registered in the account Cash.

8 0
3 years ago
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Which of the following is an example of a capital market security? a. Common stock b. Treasury bills c. Commercial paper d. A co
Oliga [24]

Answer:

a. Common stock

Explanation:

  • The capital markets are the financial market were the long term debt and equity-backed securities are brought and sold and can be put to the long term productive use as companies make long term investments. Includes the common stocks,  government stocks and certificate of deposits
6 0
3 years ago
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