BULLOCK GOLD MINING

BULLOCK GOLD MINING eth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company’s geologist, has just finished his analysis of the mine site. He has
estimated that the mine would be productive for eight years, after which the gold would he completely
mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company‘s financial officer.
Almahasbeenaskedbyfiethtoperfonnananalysis ofthe new mineandpresentherrecommendation
onwhetherthe mmpany should open the newr mine. Almahasusedtheesfimates providedhyDanto delerminethereyenues that couldheenpected
fimnmemme.fihehasflmprnjecmdmeexpenseofopenmgmemmemdmemnufloperafing
expenses. If the company opens the mine, it will cost $650 million today, and it will have a cash
outflow of $22 million nine years from today in costs associated with closing the mine and reclaiming
thearea surrounding it.’lheeitpected cashfiows eachyear tromthenline are showninthe table onthis
page. Bullock Mining has a 12 percent required return on all ofits gold mines. Year Cash Flow
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9 -72,ccc,cco LConstruct a spreadsheet to calculate the payback period, internal rate of return,
modified internal rate of return, and net present Tralue of the proposed mine. 2.Based on your analysis, should the company open the mine? ELBonus 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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