mine.Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She also has projected theexpense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $825 million today, and it willhave a cash outflow of $75 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 following table. Bullock Mining has a 12 percent required return on allof its gold mines.Year0123456789Cash Flow-$825,000,000160,000,000185,000,000215,000,000245,000,000210,000,000205,000,000190,000,000160,000,00075,000,000

Net Present value = Present value of positive cash flow - Present value of negative cash flowPresent…

Answered: Alma has used the estimates provided by…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Beyer Company is considering the purchase of an asset for $240,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Net cash flows Year 0 1 2 3 4 5 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal place.) $ Cash Inflow (Outflow) (240,000) Year 1 $60,000 Payback period = Year 2 $36,000 Cumulative Net Cash Inflow (Outflow) Year 3 $60,000
After analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…
Findell Corporation is considering two projects, A and B, and it has gathered the following estimates for the projects Project A 5 years $84,480 $64,000 Project B 5 years $57,300 $50,000 Useful life Present value of cash inflows Present value of cash outflows What is the present value index for Project A?
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There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,500 $23,000 $5,500 $61,000 Beta Project 8,000 23,000 28,000 59,000 (Click here to see present value and future value tables) https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project...? Beta Project...?
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The Karns Oil Company is deciding whether to drill for oil on a tract of land that the company owns. The company estimates the project would cost $4 million today. Karns estimates that, once drilled, the oil will generate positive net cash flows of $2 million a year at the end of each of the next 4 years. Although the company is fairly confident about its cash flow forecast, in 2 years it will have more information about the local geology and about the price of oil. Karns estimates that if it waits 2 years then the project would cost $5 million. Moreover, if it waits 2 years, then there is a 90% chance that the net cash flows would be $2.1 million a year for 4 years and a 10% chance that they would be $1.1 million a year for 4 years. Assume all cash flows are discounted at 8%. If the company chooses to drill today, what is the project's net present value? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.23 million should be entered…
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1. A mechanical device will cost $30,000 when purchased. Maintenance will cost $2,000 each year. The device will generate revenues of $5,000 each year for five years. At the end of the fifth year, the salvage value of the device is $6,500. Draw and simplify the cash flow diagram. Calculate: (a) the present value and (b) the equivalent annual cost of the cash flows using a discount rate of 12%.
Stevie’s Sporting Goods is considering investing $33,000 in a new machine. The machine is expected to last five years and have a salvage value of $8,000. Annual after-tax net cash inflow from the machine is expected to be $7,000. Calculate the accounting rate of return (aka the unadjusted rate of return). (Enter your answer as a percentage rounded to one decimal place, but do NOT include the percentage sign. For example: 5 divided by 35 is 0.142857, which you would enter as “14.3”)
Beyer Company is considering buying an asset for $350,000. It is expected to produce the following net cash flows. Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.)
After analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…

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