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Chapter 9 Net Present Value and Other Investment Criteria 311 MINICASE Bullock Gold Mining Seth Bullock, the ow ing a new gold mine in pany's geologist, has ir site. He has estimate eight years, after which Dan has taken an estimat the owner of Bullock Gold Mining, is evaluat- old mine in South Dakota. Dan Dority, the com- logist, has just finished his analysis of the mine as estimated that the mine would be productive for s, after which the gold would be completely mined. taken an estimate of the gold deposits to Alma Gar- he company's financial officer. Alma has been asked by perform an analysis of the new mine and present her mendation on whether the company should open the OUT WN-O Cash Flow -$635,000,000 89,000,000 105,000,000 130,000,000 173,000,000 205,000,000 155,000,000 145,000,000 122,000,000 - 45,000,000 new mine. 0 Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the an- nual operating expenses. If the company opens the mine, it will cost $635 million today, and it will have a cash outflow of $45 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table. Bullock Mining has a required return of 12 percent on all of its gold mines. QUESTIONS 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. 2. Based on your analysis, should the company open the mine? 3. Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback period. Write a VBA script that calculates the payback period for a project

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