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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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(10-12) 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 gold mined will net
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Mining, is evaluating a 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 gold deposits to Alma Garrett, the
company’s financial officer. Alma has been asked by Seth to perform
an analysis...
BULLOCK GOLD MINING Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold...
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Seth Bullock, the owner of Bullock Gold Mining, is evaluating a
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
gold deposits to Alma Garrett, the company’s financial officer.
Alma has been asked by Seth to perform an analysis...
Bullock Gold Mining Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold...
Bullock Gold Mining Seth Bullock, the owner of Bullock Gold
Mining, is evaluating a 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 gold deposits to Alma Garrett, the
company’s financial officer. Alma has been asked by Seth to perform
an analysis...
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Mining, is evaluating a 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 gold deposits to Alma Garrett, the
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