Case III – Chapter 8 Case,Bullock Gold Mining, page 274 is due this week.See the Syllabus section “Due Dates for Assignments & Exams” for due date information.Week 6 caseCase III – Chapter 8 Case, Bullock Gold Mining, page 274 is due this week.CHAPTER CASEBULLOCK GOLD MININGSeth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in SouthDakota. Dan Dority, the companys geologist, has just finished his analysis of the mine site. Hehas estimated that the mine would be productive for eight years, after which the gold would becompletely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, thecompanys financial officer. Alma has been asked by Seth to perform an analysis of the newmine 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 expectedfrom the mine. She has also projected the expense of opening the mine and the annual operatingexpenses. If the company opens the mine, it will cost $650 million today, and it will have a cashoutflow of $72 million nine years from today in costs associated with closing the mine andreclaiming the area surrounding it. The expected cash flows each year from the mine are shownin the table on this page. Bullock Mining has a 12 percent required return on all of its goldmines.Year Cash Flow0$650,000,000180,000,0002121,000,0003162,000,0004221,000,0005210,000,0006154,000,0007108,000,000886,000,000972,000,000QUESTIONSConstruct a spreadsheet to calculate the payback period, internal rate of return, modifiedinternal rate of return, and net present value of the proposed mine.2. Based on your analysis, should the company open the mine?Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback3.period. Write a VBA script that calculates the payback period for a project.1.
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