Reference no: EM131393909
Finance Assignment
CASE: 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 of the new mine and present her recommendation on whether the company should open the new mine.
Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $650 million today, and it will have a cash outflow of $72 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table on this page. Bullock Mining has a 12 percent required return on all of its gold mines.
|
Year
|
Cash Flow
|
|
0
|
-$650,000,000
|
|
1
|
80,000,000
|
|
2
|
121,000,000
|
|
3
|
162,000,000
|
|
4
|
221,000,000
|
|
5
|
210,000,000
|
|
6
|
154,000,000
|
|
7
|
108,000,000
|
|
8
|
86,000,000
|
|
9
|
-72,000,000
|
1. Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine.
2. Based on your analysis, should the company open the mine?
3. Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback period. Write a VBA script that calculates the payback period for a project.
|
What is the firm''s degree of financial leverage (dfl)
: The CFO determined that the firm's degree of operating leverage (DOL) is 3× at sales equal to $900,000. She also determined that, if sales are actually $945,000, EPS will be $2.60 rather than the forecasted value of $2.00. What is the firm's degre..
|
|
Calculate and interpret value of correlation coefficient
: Calculate and interpret the value of the correlation coefficient between sale price and size (consider to use some software for the calculation)
|
|
Write a research paper on change in a hrd organization
: For the final assignment of this course, you will write a research paper on change in a human resource development (HRD) organization that you work for, or would like to work for.
|
|
Discuss about the schedules of reinforcement
: Mrs. Blass is tired of her students not being prepared for class each day. She knows that they are hard-working seniors who value getting an A in the class, and she wants to set up a schedule of work so they study hard and consistently. She schedu..
|
|
Construct a spreadsheet to calculate the payback period
: Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine.
|
|
What is luxury’s degree of financial leverage (dfl)
: Luxury Leisure's forecasted EBIT is $750,000. This year, Luxury will pay $250,000 interest on its debt and $320,000 dividends to its common stockholders. If its marginal tax rate is 40 percent, what is Luxury's degree of financial leverage (DFL)?
|
|
What recommendation would you make to stanley
: What recommendation would you make to Stanley regarding hiring a new software developer? Relate your recommendation here to your responses in part a.
|
|
What is the expected payoff of the put at maturity
: What is the expected payoff of the put at maturity? Calculate the current put price by discounting the average future put payoff (its expected value) to the present at the risk-free rate: Put0 = exp(-rf ⋅ t) ⋅ Expected Future Put Value.
|
|
Choose a target behavior for your self-management project
: You will be completing a self-management project in, and your topic needs to be approved by your instructor to ensure it is behavioral, measurable, and objectively defined. Doing so ensures that you select an appropriate topic but also gets you th..
|