Matt HillApril 15, 2013FINC 300-01Bullock Gold Mining Case

1. Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine. Payback period = number of year before initial investment is payed off:

Year 0 = -750year 1 = -750 + 140 = -610year 2 = -750 + 140 + 180 = -430year 3 = -750 + 140 + 180 + 210 = -220year 3 = -750 + 140 + 180 + 210 + 230 = +10 (so we know it occurs between year 3 and 4220/230 = 0.956So the total payback period is: 3+0.956 or 3.956 years1.

YearCash Flow

0-$725,000,000.00Payback Period3.956 years

1$90,000,000.00IRR13.125%

2$135,000,000.00MIRR12.461%

3$180,000,000.00NPV$28,373,021.77

4$245,000,000.00

5$232,000,000.00

6$170,000,000.00

7$120,000,000.00

8$95,000,000.00

9-$80,000,000.00

2)

Yes, Bullock should proceed with the project due to the NPV being positive

3)

Payback Period

YearBeginning Unrecovered InvestmentCash InflowEnding Unrecovered Investment

0($725,000,000)0($725,000,000)

1($725,000,000)$90,000,000 $10,800,000 ($645,800,000)

2($645,800,000)$135,000,000 $16,200,000 ($527,000,000)

3($527,000,000)$180,000,000 $21,600,000 ($368,600,000)

4($368,600,000)$245,000,000 $29,400,000 ($153,000,000)

5($153,000,000)$232,000,000$27,840,000$51,160,000