The Perth Mining Company owns the mining rights to severaltracts of land on which metals have been found in the past. Theamount of precious metals on some of the tracts is somewhatmarginal, and the company is unsure whether it would be profitableto extract and sell the precious metals that these tracts contain.Tract 420 is one of these, and the following information about ithas been gathered:

Investment in equipment needed    for extraction work	$	400,000
Working capital investment needed	$	55,000
Annual cash receipts from sale of precious     metals, net of related cash operating     expenses (before taxes)	$	85,000
Cost of restoring land at completion    of extraction work	$	45,000

The precious metals in Tract 420would be exhausted after eight years of extraction work. Theequipment would have a useful life of 12 years, but it could besold for only 20% of its original cost when extraction wascompleted. For tax purposes, the company would depreciate theequipment using a CCA rate of 20%. The tax rate is 30%, and thecompany’s after-tax discount rate is 12%. The working capital wouldbe released for use elsewhere at the completion of the project.

Required:
1.	Compute the net present value of Tract 420. (Hint: UseMicrosoft Excel to calculate the discount factor(s).) (Donot round intermediate calculations and round your final answer tothe nearest dollar amount. Negative value should be indicated withminus sign.)

2.	Would you recommend that the investment project beundertaken?
	Yes No