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    Alifaldo Daffa Darmawan - 242221075 - Calculating NPV Etc

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    Faldo Daffa
    This document presents a case study of the cash flows from a gold mining project over 10 years. It calculates key investment metrics for the project, including a payback period of 4.21 years, an internal rate of return of 15.67%, a modified internal rate of return of 13.48%, and a positive net present value of $59,692,381 using a 12% required return, indicating the project would be a profitable investment.

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    Alifaldo Daffa Darmawan - 242221075 - Calculating NPV Etc

    Uploaded by

    Faldo Daffa
    44 views9 pages
    This document presents a case study of the cash flows from a gold mining project over 10 years. It calculates key investment metrics for the project, including a payback period of 4.21 years, an internal rate of return of 15.67%, a modified internal rate of return of 13.48%, and a positive net present value of $59,692,381 using a 12% required return, indicating the project would be a profitable investment.

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    Alifaldo Daffa Darmawan_242221075_Calculating NPV etc

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    This document presents a case study of the cash flows from a gold mining project over 10 years. It calculates key investment metrics for the project, including a payback period of 4.21 years, an internal rate of return of 15.67%, a modified internal rate of return of 13.48%, and a positive net present value of $59,692,381 using a 12% required return, indicating the project would be a profitable investment.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    44 views9 pages

    Alifaldo Daffa Darmawan - 242221075 - Calculating NPV Etc

    Uploaded by

    Faldo Daffa
    This document presents a case study of the cash flows from a gold mining project over 10 years. It calculates key investment metrics for the project, including a payback period of 4.21 years, an internal rate of return of 15.67%, a modified internal rate of return of 13.48%, and a positive net present value of $59,692,381 using a 12% required return, indicating the project would be a profitable investment.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 9

    Minicase : Bullock Gold Mining

    Year Cash Flow


    0 $ (450,000,000)
    1 $ 63,000,000
    2 $ 85,000,000
    3 $ 120,000,000
    4 $ 145,000,000
    5 $ 175,000,000
    6 $ 120,000,000
    7 $ 95,000,000
    8 $ 75,000,000
    9 $ (70,000,000)

    Known :
    Required Return 12%

    Questions :

    1. Calculate :
    Payback Period
    Internal Rate of Return (IRR)
    Modified Internal Rate of Return (MIRR)
    Net Present Value (NPV)

    2. Interpret and analyze the result


    CALCULATING PLAYBACK PERIOD

    The mining costs $450,000,000

    Year Cash Flow (CF) Cumulative


    1 $ 63,000,000 $ 63,000,000
    2 $ 85,000,000 $ 148,000,000
    3 $ 120,000,000 $ 268,000,000
    4 $ 145,000,000 $ 413,000,000 $450,000,000 is between $413,000,000-$588,000,000,
    which is between year 4 and 5.
    5 $ 175,000,000 $ 588,000,000
    6 $ 120,000,000 $ 708,000,000
    7 $ 95,000,000 $ 803,000,000
    8 $ 75,000,000 $ 878,000,000
    9 $ (70,000,000) $ 808,000,000

    - After the first four years, the cash flow total $413,000,000
    - After the fifth year, the total cash flow is $588,000,000
    - So the mining pays back sometime between the end of year 4 and year 5.
    - Because the accumulated cash flows for the first four years are $413,000,000, we need to recover $37,000,000 in the fifth
    - The fifth year cash flow is $175,000,000, so we will have to wait $37,000,000/175,000,000 = .21 year to do this
    - The payback period is thus 4 year + .21 year = 4.21 year or about 4 years and two a half months
    00-$588,000,000,

    over $37,000,000 in the fifth year


    1 year to do this
    hs
    CALCULATING IRR

    Year Cash Flow


    0 $ (450,000,000)
    1 $ 63,000,000
    2 $ 85,000,000
    3 $ 120,000,000
    4 $ 145,000,000
    5 $ 175,000,000
    6 $ 120,000,000
    7 $ 95,000,000
    8 $ 75,000,000
    9 $ (70,000,000)

    Calculation

    IRR 15.67%

    - The formula entered in cell B17 is =IRR(B4:C13).


    - Notice that the year 0 cash flow has a negative sign representing the initial cost of the project
    - The IRR result is 15.67%, so the discount rate that makes the NPV of an investment zero in this gold mining project is 15.6
    ect
    n this gold mining project is 15.67%
    CALCULATING MIRR

    The required return 12%

    Year Cash Flow


    0 $ (450,000,000)
    1 $ 63,000,000
    2 $ 85,000,000
    3 $ 120,000,000
    4 $ 145,000,000
    5 $ 175,000,000
    6 $ 120,000,000
    7 $ 95,000,000
    8 $ 75,000,000
    9 $ (70,000,000)

    Calculation

    MIRR 13.48%

    - The formula entered in cell B17 is =MIRR(B4:C13;B3;B3).


    - The MIRR result is 13.48%. MIRR is IRR with considering both the investment costs and the interest received from reinves
    d the interest received from reinvesting cash.
    CALCULATING NPV

    The required return 12%

    Year Cash Flow


    0 $ (450,000,000)
    1 $ 63,000,000
    2 $ 85,000,000
    3 $ 120,000,000
    4 $ 145,000,000
    5 $ 175,000,000
    6 $ 120,000,000
    7 $ 95,000,000
    8 $ 75,000,000
    9 $ (70,000,000)

    Calculation

    First Method
    Using manual calculation

    Year (n) Cash Flow Required Return (k) (1+k)^n


    (1) (2) (3) (4)
    0 $ (450,000,000) 12% 1.00
    1 $ 63,000,000 12% 1.12
    2 $ 85,000,000 12% 1.25
    3 $ 120,000,000 12% 1.40
    4 $ 145,000,000 12% 1.57
    5 $ 175,000,000 12% 1.76
    6 $ 120,000,000 12% 1.97
    7 $ 95,000,000 12% 2.21
    8 $ 75,000,000 12% 2.48
    9 $ (70,000,000) 12% 2.77
    NPV

    Second Method
    Using Excel Formula

    NPV $ 59,692,381

    The result of NPV is $59,692,381. The value of NPV is positive. It means if the company open that gold mining, they get goo
    Cash Flow PV ((2)/(4))
    (5)
    $ (450,000,000.00)
    $ 56,250,000.00
    $ 67,761,479.59
    $ 85,413,629.74
    $ 92,150,121.37
    $ 99,299,699.75
    $ 60,795,734.54
    $ 42,973,175.46
    $ 30,291,242.10
    $ (25,242,701.75)
    $ 59,692,380.80

    the company open that gold mining, they get good investment

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