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HIghland MInIng and Minerals Company is considering the purchase of two gold mines. Only one Investment will be made. The Australlan gold mine will cost $1,630,000 and will produce $361,000 per year In years 5 through 15 and $555,000 per year In years 16 through 25 . The U.S. gold mIne will cost $2,020,000 and will produce $258,000 per year for the next 25 years. The cost of capltal Is 10 percent. Use AppendIx D for an approximate answer but calculate your final answers using the formula and financlal calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annulty for the Australlan mine. The returns In years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.) a-1. Calculate the net present value for each project. Note: Do not round Intermedlate calculatlons and round your answers to 2 decimal places. a-2. Which Investment should be made? Australlan mine U.S. mIne b-1. Assume the Australlan mine justlfies an extra 3 percent premium over the normal cost of capltal because of Its riskiness and relative uncertainty of cash flows. Calculate the new net present value glven this assumption. Note: Negatlve amount should be Indlcated by a minus sign. Do not round Intermedlate calculatlons and round your answer to 2 decimal places. b-2. Does the new assumption change the Investment decision? Yes No

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