Question

1. You are hired by a group of investors as a consultant to recommend whether or not they will fund a mining and infrastructure project that needs a capitalization of US$120,000,000.00 for a 7-year operation at a projected profit (after tax) of US$30,000,000.00 per annum. Assuming a 10% discount rate, would you recommend to invest or not? Why? What is the NPV? (30 pts) 2. In item 1 what is the estimated IRR at seven years? What is the payback period in terms of number of years? (20 pts) 3. A mining equipment dealer has approached the Owner of a mine to sell five articulated dump trucks at a cash price of PhP25Million each, two 30-ton excavators at cash price of 30Million each to be paid by amortization/installment for 85 months. Estimate the total salvage value of the equipment after 6 years of usage given the quoted price of the dealer and the life of truck and excavator as seven and eight years, respectively (25 pts). 4. Would you dare to loan the capital needed in item 1 from a Chinese bank offering 12% interest rate for seven-year payment (25 pts)? Why? Note: Decide by comparing annual payment vs annual net income.

          1. You are hired by a group of investors as a consultant to recommend whether or not they will fund a mining and infrastructure project that needs a capitalization of US$120,000,000.00 for a 7-year operation at a projected profit (after tax) of US$30,000,000.00 per annum. Assuming a 10% discount rate, would you recommend to invest or not? Why? What is the NPV? (30 pts)

2. In item 1 what is the estimated IRR at seven years? What is the payback period in terms of number of years? (20 pts)

3. A mining equipment dealer has approached the Owner of a mine to sell five articulated dump trucks at a cash price of PhP25Million each, two 30-ton excavators at cash price of 30Million each to be paid by amortization/installment for 85 months. Estimate the total salvage value of the equipment after 6 years of usage given the quoted price of the dealer and the life of truck and excavator as seven and eight years, respectively (25 pts).

4. Would you dare to loan the capital needed in item 1 from a Chinese bank offering 12% interest rate for seven-year payment (25 pts)? Why? Note: Decide by comparing annual payment vs annual net income.

1. You are hired by a group of investors as a consultant to recommend whether or not they will fund a mining and infrastructure project that needs a capitalization of US120,000,000.00 for a 7-year operation at a projected profit (after tax) of US30,000,000.00 per annum. Assuming a 10% discount rate, would you recommend to invest or not? Why? What is the NPV? (30 pts)

2. In item 1 what is the estimated IRR at seven years? What is the payback period in terms of number of years? (20 pts)

3. A mining equipment dealer has approached the Owner of a mine to sell five articulated dump trucks at a cash price of PhP25Million each, two 30-ton excavators at cash price of 30Million each to be paid by amortization/installment for 85 months. Estimate the total salvage value of the equipment after 6 years of usage given the quoted price of the dealer and the life of truck and excavator as seven and eight years, respectively (25 pts).

4. Would you dare to loan the capital needed in item 1 from a Chinese bank offering 12% interest rate for seven-year payment (25 pts)? Why? Note: Decide by comparing annual payment vs annual net income.

Added by Brenda G.

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