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28 Sep 2019
After discovering a new gold vein in the Colorado Mountains CTCMining Corporation must decide whether to mine the deposit. Themost cost-effective method of mining gold is sulfuric acidextraction, a process that results in environmental damage. To goahead with the extraction, CTC must spend $900,000 for new miningequipment and pay $165,000 for its installation. The gold minedwill net the firm an estimated $350,000 each year over the 5-yearlife of the vein. CTCâS cost of capital is 14 percent. For thepurposes of this problem, assume that the cash inflows occur at theend of the year.
a. What are the NPV and IRR of this project?
b. Should this project be undertaken, ignoring environmentalconcerns?
c. How should environmental effects be considered when evaluatingthis, or any other, project? How might these effects change yourdecision in part b?
After discovering a new gold vein in the Colorado Mountains CTCMining Corporation must decide whether to mine the deposit. Themost cost-effective method of mining gold is sulfuric acidextraction, a process that results in environmental damage. To goahead with the extraction, CTC must spend $900,000 for new miningequipment and pay $165,000 for its installation. The gold minedwill net the firm an estimated $350,000 each year over the 5-yearlife of the vein. CTCâS cost of capital is 14 percent. For thepurposes of this problem, assume that the cash inflows occur at theend of the year.
a. What are the NPV and IRR of this project?
b. Should this project be undertaken, ignoring environmentalconcerns?
c. How should environmental effects be considered when evaluatingthis, or any other, project? How might these effects change yourdecision in part b?
a. What are the NPV and IRR of this project?
b. Should this project be undertaken, ignoring environmentalconcerns?
c. How should environmental effects be considered when evaluatingthis, or any other, project? How might these effects change yourdecision in part b?
Irving HeathcoteLv2
30 Sep 2019
