Cost of new equipment and timbers. Working capital required. Annual net cash receipts Cost to construct new roads in three years. Salvage value of equipment in four years $275,000 $100,000 $120,000* $40,000 $65,000 "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.
Cost of new equipment and timbers. Working capital required. Annual net cash receipts Cost to construct new roads in three years. Salvage value of equipment in four years $275,000 $100,000 $120,000* $40,000 $65,000 "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following
The mineral deposit would be exhausted after four years of mining. At that point, the
Required:
What is the net present value of the proposed mining project? Should the project be accepted? Explain.
Transcribed Image Text:Cost of new equipment and timbers.
Working capital required.
Annual net cash receipts
Cost to construct new roads in three years.
Salvage value of equipment in four years
$275,000
$100,000
$120,000*
$40,000
$65,000
"Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and
so forth.
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