Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.4 million and annual operating expenses of C$19.43 million. Maritime expects that over a 5-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.06% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project.

Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.4 million and annual operating expenses of C$19.43 million. Maritime expects that over a 5-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.06% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (CS stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$67.7 million and annual operating expenses of C$19.44 million Maritime expects that over a five-year operating life it can recover 176,000 ounces of gold from the mine and that the project will have no terminal cash flow. Maritime uses straight-line depreciation, has a 21.07% corporate tax rate, and has a(n) 11.1% cost of capital. a. Calculate the periodic cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project.…
Integrative: Complete investment decision With the market price of gold at C$1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.3 million and annual operating expenses of C$19.37 million. Maritime expects that over a five-year operating life it can recover 175,000 ounces of gold from the mine and that the project will have no terminal cash flow. Maritime uses straight-line depreciation, has a 21.03% corporate tax rate, and has a(n) 11.2% cost of capital. a. Calculate the periodic cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project.…
Integrative: Complete investment decision With the market price of gold at CS1,562.50 per ounce (C$ stands for Canadian dollars), Maritime Resources Corp., a Canadian mining firm, would like to assess the financial feasibility of reopening an old gold mine that had ceased operations in the past due to low gold prices. Reopening the mine would require an up-front capital expenditure of C$68.1 million and annual operating expenses of CS19.38 million. Maritime expects that over a 5-year operating life it can recover 173,000 ounces of gold from the mine and that the project will have no terminal value. Maritime uses straight-line depreciation, has a 21.01% corporate tax rate, and has a(n) 10.9% cost of capital. a. Calculate the operating cash flows for the gold mine project. b. Depict on a timeline the net cash flows for the gold mine project. c. Calculate the internal rate of return (IRR) for the gold mine project. d. Calculate the net present value (NPV) for the gold mine project. e.…
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