Coloma Copper Incorporated is able to produce $640 worth of copper from one ton of low-grade copper ore. Because of its higher copper content, Coloma can produce $940 worth of copper from one ton of high-grade copper ore. Assuming Coloma currently has 5,000 tons of high-grade ore, and a mining company is offering to trade Coloma 7,250 tons of low-grade copper ore for 5,000 tons of high-grade copper ore. What do you suggest Coloma to do?

Coloma Copper Incorporated is able to produce $640 worth of copper from one ton of low-grade copper ore. Because of its higher copper content, Coloma can produce $940 worth of copper from one ton of high-grade copper ore. Assuming Coloma currently has 5,000 tons of high-grade ore, and a mining company is offering to trade Coloma 7,250 tons of low-grade copper ore for 5,000 tons of high-grade copper ore. What do you suggest Coloma to do?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 12P: After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide...

See similar textbooks

Similar questions

After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that could result in environmental damage. Before proceeding with the extraction, CTC must spend 900,000 for new mining equipment and pay 165,000 for its installation. The mined gold will net the firm an estimated 350,000 each year for the 5-year life of the vein. CTCs cost of capital is 14%. For the purposes of this problem, assume that the cash inflows occur at the end of the year. a. What are the projects NPV and IRR? b. Should this project be undertaken if environmental impacts were not a consideration? c. How should environmental effects be considered when evaluating this or any other project? How might these concepts affect the decision in part b?
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year over the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year. What is the NPV, and IRR of the project? Critically discuss how environmental effects should be considered when evaluating these types of projects (impact investing), include in your discussion the challenges in quantifying these issues in finance decisions of business organizations?
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year over the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year. What is the NPV, and IRR of the project? [Note: you are supposed to show every step of your calculation and interpret the result
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year of the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year. a)Calculate the NPV,and the IRR of the project. b)Critically discuss how environmental effects should be considered when evaluating these types of projects (impact investing),include in your discussion the challenges in quantifying these issues in finance decisions of business organizations?
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year over the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year. What is the NPV, and IRR of the project? [Note: you are supposed to show every step of your calculation and interpret the result.] Critically discuss how environmental effects should be considered when evaluating these types of projects (impact investing), include in your discussion the challenges in quantifying these issues in…
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year over the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year. a.What is the NPV, and IRR of the project? b.Critically discuss how environmental effects should be considered when evaluating these types of projects (impact investing), include in your discussion the challenges in quantifying these issues in finance decisions of business organizations?
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year over the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year. What is the NPV, and IRR of the project? [Note: you are supposed to show every step of your calculation and interpret the result.] without using excel
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year over the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year. Critically discuss how environmental effects should be considered when evaluating these types of projects (impact investing), include in your discussion the challenges in quantifying these issues in finance decisions of business organizations?
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA Mining Corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost-effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA Mining Corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year for the next five years of the extraction. SA’s cost of capital is 14% and assumes that cash flows occur at the end of each year. What is the NPV, and IRR of the project? [Note: you are supposed to show every step of your calculation and interpret the result.] Critically discuss how environmental effects should be considered when evaluating these types of projects (impact investing), include in your discussion the challenges in quantifying these issues in…
A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north of Johannesburg. SA mining corporation will have to decide if they should set up a mine in the newly discovered location. They will be using the most cost effective, but environmentally damaging method of gold mining sulfuric acid extraction. To go ahead SA mining corporation must spend $900,000 on new mining equipment and pay $165,000 for its installation. The goldmine will make an annual profit contribution of $350,000 each year over the next five years of the extraction. SA’s cost of capital is 14% and assume that cash flows occur at the end of each year.a) What is the NPV, and IRR of the project? [Note: you are supposed to show every step of your calculation and interpret the result.] b) Critically discuss how environmental effects should be considered when evaluating these types of projects (impact investing), include in your discussion the challenges in quantifying these issues in…
The company is considering opening a strip mine in The Gunnedah Basin on 5,000 acres of land purchased 10 years ago for $12 million. Based on a recent appraisal, the company feels it could receive $15.5 million if it sold the land today. Because it is currently operating at full capacity, WHC will need to purchase additional necessary equipment, which will cost $77 million. To get the equipment in running order, there would be a $2 million shipping fee and a $3 million installation charge. The equipment will bedepreciated to zero on a straight-line basis over its economic life of 15 years. The contract runs for only eight years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 10 percent of its initial purchase price in eight years.However, WHC plans to open another strip mine at that time and will use the equipment at the new mine. The equipment also requires staff to be specially trained; fortunately, a similar equipment…
The company is considering opening a strip mine in The Gunnedah Basin on 5,000 acres of land purchased 10 years ago for $12 million. Based on a recent appraisal, the company feels it could receive $15.5 million if it sold the land today. Because it is currently operating at full capacity, WHC will need to purchase additional necessary equipment, which will cost $77 million. To get the equipment in running order, there would be a $2 million shipping fee and a $3 million installation charge. The equipment will bedepreciated to zero on a straight-line basis over its economic life of 15 years. The contract runs for only eight years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 10 percent of its initial purchase price in eight years.However, WHC plans to open another strip mine at that time and will use the equipment at the new mine. The equipment also requires staff to be specially trained; fortunately, a similar…