Chapter 8 Case

CHAPTER CASE: BULLOCK GOLD MINING

Teofilo Lopez

BUSN 379

April 9, 2017

Professor Luxe Isaac

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CHAPTER CASE
BULLOCK GOLD MINING

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.

Year Cash Flow

0 -$650,000,000
1 80,000,000
2 121,000,000
3 162,000,000
4 221,000,000
5 210,000,000
6 154,000,000
7 108,000,000
8 86,000,000
9 -72,000,000

Required return 12%

After the fourth year, the cash flow is 584,000,000

So the project pays back sometime the end of
year 4 and the end of year 5. We still need 66,000,000
The fifth-year cash flow is $210,000,000
Payback Period 4.31
IRR= 13.25%
MIRR= 12.51%
NPV= $28,451,509.51

2. Based on the results of payback period, IRR, MIRR and NPV, it can be said that the company
should
open the mine since it will be able to recover its investment in less than 5 years, with a IRR of
13.25%
and a MIRR of 12.51% which are greater than the 12 percent of required return of capital for the
mining
investment plus a positive NPV of $28,451,509.51.
3. Bonus question: Most spreadsheets do not have a buit-in formula to calculate the payback period.
Write a VBA script that calculates the payback period for a project.

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3.Bonus 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.

Payback period = Amount invested

Expected annual cash inflow

Function PAYBACK (invest, finflow) Explanation:

Dim x As Double, v As Double invest The values of investment
Dim c As Integer, i As Integer finflow Cash inflow
x = Abs (invest) Dim a function to allocates space in the memory to create variable
i=1 Abs the absolute value of invest variable
c = finflow.Count i the number of payback years
Do finflow.count counts the number cash inflows
x=x-v finflow.cell amount of the cash inflow in each cell
v = finflow.Cells(i).Value in the excel file, the value will be assigned
if x = v Then to variable v
PAYBACK = 1
Exit Function If the invested value is equal to cash inflow value,
Elself x < v Then then i = will be returned as the number of payback years
P=i-1
Z=x/v If the invested amount is less than the cash inflows, then the
PAYBACK = P + Z Formula 1 will be implemented, the result will be returned as
Exit Function the number payback years
End if
i=i+1 If the amount invested is more than the Cash Inflows (x > v),
Loop Until i > c the payback will not occur
PAYBACK = "no payback"
End Function