Windhoek Mines, Limited, 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 cash flows would be associated with opening and operating a mine in the area:
Receipts from sales of ore, less outofpocket costs for salaries, utilities, insurance, and so forth.
The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for
reinvestment elsewhere. The company's required rate of return is
Click here to view Exhibit B and Exhibit B to determine the appropriate discount factors using tables.
Required:
a What is the net present value of the proposed mining project?
b Should the project be accepted?
