Matt Hill

April 15, 2013

FINC 300-01
Bullock 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 = -750
year 1 = -750 + 140 = -610
year 2 = -750 + 140 + 180 = -430
year 3 = -750 + 140 + 180 + 210 = -220
year 3 = -750 + 140 + 180 + 210 + 230 = +10 (so we know it occurs between year 3 and 4
220/230 = 0.956
So the total payback period is: 3+0.956 or 3.956 years
1.
Year
0
1
2
3
4
5
6
7
8
9

Cash Flow
-$725,000,000.00
$90,000,000.00
$135,000,000.00
$180,000,000.00
$245,000,000.00
$232,000,000.00
$170,000,000.00
$120,000,000.00
$95,000,000.00
-$80,000,000.00

Payback Period
IRR
MIRR
NPV

3.956 years
13.125%
12.461%
$28,373,021.77

2)
Yes, Bullock should proceed with the project due to the NPV being positive
3)
Payback Period
Beginning Unrecovered
Year
Investment
0
($725,000,000)
1
($725,000,000)
2
($645,800,000)
3
($527,000,000)
4
($368,600,000)
5
($153,000,000)

Cash Inflow
0
$90,000,000
$135,000,000
$180,000,000
$245,000,000
$232,000,000

$10,800,000
$16,200,000
$21,600,000
$29,400,000
$27,840,000

Ending Unrecovered
Investment
($725,000,000)
($645,800,000)
($527,000,000)
($368,600,000)
($153,000,000)
$51,160,000