Question
In: Finance
After discovering a new gold vein in the Kilimambogo Mountains, ABC Mining Corporation must decide whether...
After discovering a new gold vein in the Kilimambogo Mountains, ABC Mining Corporation must decide whether to mine the deposit. The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environmental damage. To go ahead with the extraction, ABC must spend Shs.9, 000,000 for new mining equipment and pay Shs.1,650,000 for its installation.The gold mined will net the firm an estimated Shs.4, 000,000 each year over the 5-year life of the vein. ABC’s cost of capital is 12%. For the purposes of this problem, assume that the cash inflows occur at the end of the year.
- What are the NPV and IRR of this project?
- Should this project be undertaken, ignoring environmental concerns?
- How should environmental effects be considered when evaluating this, or any other, project? How might these effects change your decision in part b?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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new gold mine in South Dakota. Dan Dority, the company’s geologist,
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
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gold would be completely mined. Dan has taken an estimate of the
gold deposits to Alma Garrett, the company’s financial officer.
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