Having been hired as a mineral economist, evaluate the profitability and viability of a mineral project made up of a mobile processing plant designed to process 450,000 tonnes of copper reserves at an average grade of 2.75% Cu and 90% recovery. The following information on the reserve is established for use. Commodity selling price US Mining Processing de-escalates @ 2% per annum Corporate tax Mineral royalty Capital Expenditure $2,250/tonne $50/tonne 30% 4% $2,000,000 $250,000 3,750 tpm 20% Depreciation scrap value on SYD method Production rate Discount rate Commodity price increase by 5% per year Required: a) Compute the Net Operating Cash Flows (NOCF) b) Determine the project viability by using the NPV method c) What monetary value is attached to the project at 30% discount rate?
Having been hired as a mineral economist, evaluate the profitability and viability of a mineral project made up of a mobile processing plant designed to process 450,000 tonnes of copper reserves at an average grade of 2.75% Cu and 90% recovery. The following information on the reserve is established for use. Commodity selling price US Mining Processing de-escalates @ 2% per annum Corporate tax Mineral royalty Capital Expenditure $2,250/tonne $50/tonne 30% 4% $2,000,000 $250,000 3,750 tpm 20% Depreciation scrap value on SYD method Production rate Discount rate Commodity price increase by 5% per year Required: a) Compute the Net Operating Cash Flows (NOCF) b) Determine the project viability by using the NPV method c) What monetary value is attached to the project at 30% discount rate?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION
Having been hired as a mineral economist, evaluate the profitability and viability of a mineral
project made up of a mobile processing plant designed to process 450,000 tonnes of copper
reserves at an average grade of 2.75% Cu and 90% recovery.
The following information on the reserve is established for use.
Commodity selling price US
$2,250/tonne
Mining/Processing de-escalates @ 2% per annum
$50/tonne
Corporate tax
30%
Mineral royalty
4%
Capital Expenditure
$2,000,000
Depreciation scrap value on SYD method
$250,000
Production rate
3,750 tpm
Discount rate
20%
Commodity price increase by 5% per year
Required:
a) Compute the Net Operating Cash Flows (NOCF)
b) Determine the project viability by using the NPV method
c) What monetary value is attached to the project at 30% discount rate?
d) Explain with figures the acceptability of this project at 40% discount
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