Seth Bullock, the owner of Bullock Gold Mining, is evaluating anew gold mine in South Dakota. Dan Dority, the company’s geologist,has just finished his analysis of the mine site. He has estimatedthat the mine would be productive for eight years, after which thegold would be completely mined. Dan has taken an estimate of thegold deposits to Alma Garrett, the company’s financial officer.Alma has been asked by Seth to perform an analysis of the new mineand present her recommendation on whether the company should openthe new mine.

Alma has used the estimates provided by Dan to determine therevenues that could be expected from the mine. She has alsoprojected the expense of opening the mine and the annual operatingexpenses. If the com- pany opens the mine, it will cost $850million today, and it will have a cash outflow of $120 million nineyears from today in costs associated with closing the mine andreclaiming the area surrounding it. The expected cash flows eachyear from the mine are shown in the table that follows. Bullock hasa 12 percent required return on all of its gold mines.

YEAR	CASH FLOW
0 1 2 3 4 5 6 7 8 9	-$850,000,000 165,000,000 190,000,000 225,000,000 245,000,000 235,000,000 195,000,000 175,000,000 155,000,000 -120,000,000

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?