Please detail of my question is in the attach file.

Pag e 1 of 7 AA nnssww eerr AA llll QQ uueessttiioonnss NN oottee:: AA ttoottaall ooff 1100 mm aarrkkss,, mm aaddee uupp ooff 22 mm aarrkkss ffoorr eeaacchh ooff tthhee ffoollllooww iinngg,, ww iillll bbee aaww aarrddeedd:: lleeggiibbiilliittyy,, llaanngguuaaggee,, pprreesseennttaattiioonn,, llooggiiccaall rreeaassoonniinngg,, aanndd pprrooffeessssiioonnaall ttoouucchh.. Question 1 The Tar kus M ining Com pany (TM C) has m ade to following arrang em ents to ra ise a total capital of $50 million to underta ke a m ining project: $10 million is to be raised by iss uing hundred thousand prefer red stock shar es costing $100 per share wi th a prom ise to pay $20 di vidend per share every ye ar. $20 million is to be raised as a loan from a bank at a ye arly interest rate of 10% com pounded qu arterly. $20 million is to be raised by selling twe nty thousa nd bonds at $1000 per bond. Each bond will m ature in 10 years wi th a m aturity value of $1200 and also earn a di vidend of $100 per year. (i) W hat is TM C' s cost of the total ca pital? (16 m ark s) (ii) W hat is the significa nce of the cost of ca pital in the ec onom ic ev aluat ion of the m ining project? (4 m arks) Question 2 Pag e 2 of 7 TM C is con sidering replacing an equipm ent at one of its mines. Purchasing and installation of the new equ ipm ent will cost $ 15 00 0. It wi ll have an estimated servi ce life of 8 ye ars and $ 3 0 00 sa lvag e va lue. The operating cost will average $ 10 0/yr. The present equipm ent is expected to have 8 more ye ars of servi ce life, at the end of which it can be sold for $2 000; its operating cost is $ 1 80 0/yr. If the present equipm ent is replaced no w, it can be sold for $5 000. If the mi nimum rate of return is 15%, should TM C replace the present equ ipm ent? (20 m ark s) Question 3 De Ro Mi ning Comp any (DRM C) is eva luating the economi cs of whether to purchase a mi neral property now (ye ar zero) for $10 M with plans to spend a significant amount of capital in the next year (yea r 1) for developm ent. Producti on is exp ected to start in ye ar 2 with an annua l profit of $2 M p er ye ar up to the end of year 15 when the project will be term inated with zero sa lvag e value. W hat capital co st can be incurred in ye ar 1 for the project to brea k even if the mi nimum rate of re turn is 20%. Question 4 Rea d the info rmation pr ovided here and answer the qu estions that follow. Locate d nea r W inneba in the Central Region of Ghana, the Mi ke Rock Qu arry (MR Q) has over 10.00 mi llion cubic me tres of granite rese rve s. The setting up of MR Q too k 2 ye ars and it has operated for the past 3 years. Because of the high qu ality of its quarry prod ucts, MR Q had been enjoying the patro nage of numerous clients. Re cently, ho wever, MR Q has bee n facing operationa l problems due to lack of spare parts to repa ir and maintain its equ ipm ent and lack of wo rking capital to operate smo othly. The current situation is tha t MR Q is unable to prod uce the mi nimum of 30 000 m3 of granite agg regate per mon th to me et the dem and of its clients; production has gone dow n significantly, making it impos sible for M RQ to me et its statutory financial obligations. If M RQ cou ld repair its equ ipm ent, purchase add itional new equipm ent, pay for outstandi ng statutory financial obligations and secure sufficient wo rking capital, it co uld conve niently prod uce the requ ired 30 000 m3 of granite agg regate per m onth. Pag e 3 of 7 To arrest the situa tion , the Board of Directors (B oD ) of M RQ has requ ested for a compr ehensive eva luatio n of the quarry with the following Terms of Reference (ToR) : (i) Estimate the initial capital spent on acq uisition of the granite con cession, exp loration and comp ensation and the current va lue of existing equipme nt; (4 m arks) (ii) Estimate the direct capital requ ired to purchase spare parts and acce ssories to repair existing equipm ent and also purchase add itional new equ ipm ent so that the qu arry can conv eniently prod uce 30 000 m3 of agg regate per mon th; (4 marks) (iii) Estimate the indir ect capital requ ired to pay for outstand ing sta tutory financial obligations; (4 m arks) (iv) Estimate the working capital requ ired to enable MR Q to operate smo othly; (4 m arks) (v) Estimate the yearly op erating cost when the prod ucti on is 30 000 m3 per m onth. (4 m arks) (vi) Estimate the exp ected yea rly reve nues; (4 m arks) (vii) C ondu ct a cash flow analys is for the next 10 years taking into accou nt all statutory provisions in the inv estment laws of Ghana; (4 m arks) (viii ) Inv estigate the sensitivity of the quarry to changes in reve nue, capital co st and operating co st and condu ct risk analysis; (4 m arks) (ix) Advise the BoD on the me rit s of the M RQ. (4 m arks) The BoD has made it clear tha t, dependi ng on the ou tcome of the evaluation, they would ask the shareholders to go for one of the following options: (i) Call for add itiona l equ ity con tribution s by the 3 sha reholders of M RQ to purchase the add itional new equipm ent, pay for outstandi ng sta tutory fina ncial obligations and provi de for a wo rking capital and so op erat e the quarry wi th 10 0% equ ity; (ii) Se cure a loan to purchase the add itional new equ ipm ent, pay for outsta nding Pag e 4 of 7 statutory financial obligations and provide for a wo rking capital and so operate the qu arry partly with equity and partly with loan; or (iii) St op operating the qu arry and sell it out at least to pay for outstand ing statutory financial obligations and defray the initial capital. The shareholders have caution ed that they cannot secure any loan that will attract an interest less than 10% and that they wo uld exp ect at least 13. 5% return on their inv estm ent. Upon request, the M anageme nt Tea m of M RQ has provided some inform ation that could be useful in the evalua tion of the qu arry. This inform ation is presented in Tables 1, 2, & 3. In add iti on, the Ma nageme nt Team has con firmed that the ave rage selling price of the qu arry prod ucts is $ 15/ m3. An swer the following questions: (a) Ma king use of the available inform ation plus other realistic cos ts that you can obtain by research and taking into account the ToR of the BoD of MRQ , condu ct a compr ehensive eva luatio n of the quarry and he nce advise the BoD . (7 marks) (b) Ap art from the 3 options stated by the BoD , state any other option the BoD cou ld con sider, giving the justification for such option . (12 m arks) (c) At the given prod uction rate, what is the exp ected life of the quarry? (6 m arks) (d) Sug gest any reason why the BoD wants 10 years to be con sidered for the eva lua tion of the quarry. (6 m arks) Table 1 Information on M RQ’ s Existing Equ ipm ent No.

Equipme nt Fleet ID Purchase Price Rated Use fulne ss Life Spent Life 1 Atlas Copco 3D Rock Drill MR Q RD 1 19 7 600 20 00 0 hr 3 00 0 hr 2 CAT 33 0 DL Excavator MR Q E1 32 5 000 30 000 hr 11 50 0 hr 3 CAT 32 5 CLN Excavator MR Q E2 15 6 000 30 00 0 hr 9 00 0 hr 4 CAT 966 H Wheel Load er MR Q WL1 26 0 000 30 00 0 hr 2 00 0 hr 5 Metso LT110 c Mobile Seconda ry Cone Crusher MR Q C1 88 8 000 30 00 0 hr 9 06 2 hr 6 Metso LT 30 0 GPB Mobile Second ary Cone Crusher MR Q C2 1 36 0 00 0 30 00 0 hr 8 20 0 hr 7 Metso ST 45 8 Mobile Screen MR Q C3 32 8 000 30 00 0 hr 8 00 0 hr 8 SD M0 40 KV Gene rator MRQ GE2 7 80 0 20 00 0 hr 10 00 0 hr 9 SD M0 30 KV Gene rator MR Q GE2 6 50 0 20 00 0 hr 10 00 0 hr 10 Mosa We lding Set MR Q WG1 5 00 0 20 00 0 hr 5 00 0 hr 11 To yota Hilux Pick -up MR Q LV1 35 00 0 25 0 000 km 30 00 0 km 12 To yota Hilux Pick -up MR Q LV2 * 12 50 0 20 0 000 km 70 00 0 km 13 To yota Hilux Pick -up MR Q LV3* 7 50 0 15 0 000 km 80 00 0 km 14 Hyundai Mini Bus MR Q MB 1* 7 50 0 20 0 000 km 80 00 0 km 15 Qu ad Bike MRQ B1 7 00 0 18 0 000 km 80 00 0 km 16 Qu ad Bike MR Q B2 7 00 0 18 0 000 km 80 00 0 km 17 Hy draulic Hammer MR Q HH1 39 00 0 30 00 0 hr 18 00 0 hr 18 Grizz ly MR Q GRS1 5 60 0 20 00 0 hr 0 hr 19 Atlas Copco X36 Comp ressor MR Q CP1 6 40 0 30 00 0 hr 1 50 0 hr Pag e 5 of 7 Table 2 Capital Items of MR Q Category Code Cost Centre Amount (US$x103) C 1 Initial Capital C 1.1 Ac quisiti on, Exploration, Compen sation 100 .00 C 1.2 Existi ng Equip ment C 1.3 Site Infrastructure and Facilities 150 .00 Sub total C 1 C 2 Direct Capital for Add ition al New Equ ipm ent C 2.1 SEM W he el Lo ader C 2.2 VS I Imp actor C 2.3 Ta mrock Drill Ri g C 2.4 Toyo ta Bus C 2.5 Toyo ta Pick-up x3 C 2.6 CAT 100 KVA Gens et C 2.7 CAT 40 KVA Gens et C 2.8 Spa res and Accessories 300 .00 Sub total C 2 C 3 Ind irect Capital for Out sta nd ing Statutory Obliga tions C 3.1 Compen sations 50 .00 C 3.2 Legal Issues and CSR 200 .00 C 3.3 Explosive Magazine 10 .00 C 4 W orki ng Capital 230 .00 C 5 Con tingency Allowanc e 226 .72 Total Capital Cost Note: Leg al issues include ou tstanding bills in respect of ro yalty, gro und ren t, taxes, licens es and per m its. Table 3 Unit Operating Cos ts of M RQ Pag e 6 of 7 Cost Centre Unit Cost ($/m3) Overbu rden Removal 0.50 Drilling 0.30 Blasting 1.00 Cr ush ing and Scree ning 1.00 Fuel 1.20 Equip me nt Hiring 0.20 Salaries 1.50 Overhe ads 0.30 Administration 0.30 Pag e 7 of 7