The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer,...

Question

The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $911,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $153,000 at the end of t...

David · Accepted Answer

he Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty 
Goldstein, “This is a golden opportunity.” The mine will cost $911,000 to open and will have an economic life of 11 
years. It will generate a cash inflow of $153,000 at the end of the first year, and the cash inflows are projected to 
grow at 11 percent per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs 
will be $114,000 at the end of year 11. 
IRR & NPV
Solution: 
Calculation of yearly cash flows: 
Year Cash flows 
1 $153,000  
2 $169,830.00  
3 $188,511.30  
4 $209,247.54  
5 $232,264.77  
6 $257,813.90  
7 $286,173.43  
8 $317,652.50  
9 $352,594.28  
10 $391,379.65  
11 $434,431.41  
Calculation: Year 2 cash flows = Year 1 cash flow 153000 x 1.

The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $911,000 to open and will have...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment