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LOGOLOGOBullock Gold MiningCorporate Finance Case StudyUun Ainurrofiq 1111200141Yoong Khai Hung 1111200139Khatereh Azarnoo...
Case OverviewSeth Bullock(Owner)Dan Dority(Geologist)Alma Garrett(CFO)Hi fellas..we plan to work on a new Gold Minein Sout...
Alma’s Cash flow EstimationYear Cash Flow0 $ (400,000,000.00)1 $ 85,000,000.002 $ 90,000,000.003 $ 140,000,000.004 $ 180,0...
Bonus Question (VBA Script)Questions of The CasePayback PeriodIRR & MIRRFinancial DecisionNPV (Net Present Value)
Payback Period (Spreadsheet)*Formula Payback Period in C15 =-C7/(B8)+3*Formula Disc Payback Period in E15 =-E8/(D9)+4
Discounted Payback PeriodYear Initial Investment Discounted Cashflow0 -$400,000,0001 $85,000,000 / (1.12)1 = $75,892,8572 ...
The Concept of NPV
NPV (Manual Calculation)Year Cash Flow Calculation Present Value0 $ (400,000,000.00) $ (400,000,000)1 $ 85,000,000.0085,00...
NPVNPV formula in Ms Excel = NPV (rate, values)NPV formula in after correction = NPV (rate, values) + initial cost
IRRIRR formula in Ms Excel = IRR (values)MIRR formula in Ms Excel = MIRR (values, finance rate, reinvest rate )
IRRIRR = 24%13,777,690/x = 171,141,294.31/13-xx = 0.98
MIRRYear cash flow future value factor at 15% terminal value $1 85 000 000 (1.12)^8 210 465 8702 90 000 000 (1.12)^7 198 9...
MIRRMIRR = 16.21 %MIRR = 16.21 %In PV table 0.2587 ► 16.21%other method
Financial DecisionDecisionINVEST !!!MIRR > R16.21 %NPV (+)$ 171,141,294.311.The Payback Period is within the investment li...
NPV vs IRRNPV or IRR ??
NPV vs IRRMutually Exclusive ProjectsNPV moreIRR lessNPV lessIRR moreHow to decide ???
NPV vs IRRFind value of “i”Project A-1000 000+350 000/(1+i)^1+400 000/(1+i)^2+500 000/(1+i)^3+650 000/(1+i)^4+700 000/(1+i...
NPV & IRR903,021562,21436% 42%Crossover point29.165%170,981NPVDiscount RateMutually Exclusive Projects
Bonus QuestionSeth Bullock(Owner)Most spreadsheets do not havebuilt-in formula to calculate thepayback period.Write a VBA ...
Bonus QuestionPayback period = Amount invested ⁄ Expected annual cash inflow*When the periodic cash inflows are unequal, “...
VBA ScriptFunction PAYBACK(invest, finflow)Dim x As Double, v As DoubleDim c As Integer, i As Integerx = Abs(invest)i = 1c...
VBA Script (cont’d)Function PAYBACK(invest, finflow)Dim x As Double, v As DoubleDim c As Integer, i As Integerx = Abs(inve...
Company Cash FlowYear Cash Flow0 - $400,000,0001 85,000,0002 90,000,0003 140,000,0004 180,000,0005 195,000,0006 130,000,00...
VBA Running in Ms Excel
Seth Bullock(Owner)Dan Dority(Geologist)Alma Garrett(CFO)Thank You
LOGOLOGOBack-Up Slides
Payback PeriodYear Cash outflow Cash Inflow Payback0 -$400,000,000 -$400,000,0001 $85,000,000 -$315,000,0002 $90,000,000 -...
Discounted Payback PeriodYear Discounted Cash outflow Discounted Cash Inflow Payback0 -$400,000,000 -$400,000,0001 $75,892...
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Corporate Finance Case Study : Bullock Gold Mining

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Corporate Finance Assignment

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Corporate Finance Case Study : Bullock Gold Mining

  1. 1. LOGOLOGOBullock Gold MiningCorporate Finance Case StudyUun Ainurrofiq 1111200141Yoong Khai Hung 1111200139Khatereh Azarnoor 1101600315Aliakbar Bahrpeyma1091200261Jevgenijs Lesevs 1111200131Shahin Firouztash 1111200070
  2. 2. Case OverviewSeth Bullock(Owner)Dan Dority(Geologist)Alma Garrett(CFO)Hi fellas..we plan to work on a new Gold Minein South Dakota !!Not Bad.. based on my estimation,that site would be productive foreight year sir..Alright gentleman, Chill out..I’ll do the financial analysis to helpyou making a rational decision
  3. 3. Alma’s Cash flow EstimationYear Cash Flow0 $ (400,000,000.00)1 $ 85,000,000.002 $ 90,000,000.003 $ 140,000,000.004 $ 180,000,000.005 $ 195,000,000.006 $ 130,000,000.007 $ 95,000,000.008 $ 60,000,000.009 $ (95,000,000.00)$(500,000,000.00)$(400,000,000.00)$(300,000,000.00)$(200,000,000.00)$(100,000,000.00)$-$100,000,000.00$200,000,000.00$300,000,000.000 1 2 3 4 5 6 7 8 9Initial InvestmentReclamation CostCash Inflow /Revenue StreamOur companyrequired rate ofreturn is 12%
  4. 4. Bonus Question (VBA Script)Questions of The CasePayback PeriodIRR & MIRRFinancial DecisionNPV (Net Present Value)
  5. 5. Payback Period (Spreadsheet)*Formula Payback Period in C15 =-C7/(B8)+3*Formula Disc Payback Period in E15 =-E8/(D9)+4
  6. 6. Discounted Payback PeriodYear Initial Investment Discounted Cashflow0 -$400,000,0001 $85,000,000 / (1.12)1 = $75,892,8572 $90,000,000 / (1.12)2 = $71,747,4493 $140,000,000 / (1.12)3 = $99,649,2354 $180,000,000 / (1.12)4 = $114,393,2545 $195,000,000 / (1.12)5 = $110,648,2376 $130,000,000 / (1.12)6 = $65,862,0467 $95,000,000 / (1.12)7 = $42,973,1758 $60,000,000 / (1.12)8 = $24,232,9949 -$95,000,000 / (1.12)9 = -$34,257,952
  7. 7. The Concept of NPV
  8. 8. NPV (Manual Calculation)Year Cash Flow Calculation Present Value0 $ (400,000,000.00) $ (400,000,000)1 $ 85,000,000.0085,000,000 / (1.12)1$ 75,892,8572 $ 90,000,000.0090,000,000 / (1.12)2$ 71,747,4493 $ 140,000,000.00140,000,000 / (1.12)3$ 99,649,2354 $ 180,000,000.00180,000,000 / (1.12)4$ 114,393,2545 $ 195,000,000.00195,000,000 / (1.12)5$ 110,648,2376 $ 130,000,000.00130,000,000 / (1.12)6$ 65,862,0467 $ 95,000,000.0095,000,000 / (1.12)7$ 42,973,1758 $ 60,000,000.0060,000,000 / (1.12)8$ 24,232,9949 $ (95,000,000.00)-95,000,000 / (1.12)9$ (34,257,952)Net Present Value >> $ 171,141,294
  9. 9. NPVNPV formula in Ms Excel = NPV (rate, values)NPV formula in after correction = NPV (rate, values) + initial cost
  10. 10. IRRIRR formula in Ms Excel = IRR (values)MIRR formula in Ms Excel = MIRR (values, finance rate, reinvest rate )
  11. 11. IRRIRR = 24%13,777,690/x = 171,141,294.31/13-xx = 0.98
  12. 12. MIRRYear cash flow future value factor at 15% terminal value $1 85 000 000 (1.12)^8 210 465 8702 90 000 000 (1.12)^7 198 961 3273 140 000 000 (1.12)^6 276 335 1764 180 000000 (1.12)^5 317 221 5035 195 000 000 (1.12)^4 306 836 2756 130 000 000 (1.12)^3 182 640 6407 95 000 000 (1.12)^2 119 168 0008 60 000 000 (1.12)^1 67 200 0001678828791DCF0= 400 000 000/(1.12)^0 = 400 000 000DCF9= 95 000 000/(1.12)^9 = 34 257 952.37434 257 952.37
  13. 13. MIRRMIRR = 16.21 %MIRR = 16.21 %In PV table 0.2587 ► 16.21%other method
  14. 14. Financial DecisionDecisionINVEST !!!MIRR > R16.21 %NPV (+)$ 171,141,294.311.The Payback Period is within the investment lifespan: Good2.The Net Present Value has a Positive Value: Good3.The MIRR is greater than the current cost of capital GoodDiscounted Payback Period 4.35 ( < 8 Years)
  15. 15. NPV vs IRRNPV or IRR ??
  16. 16. NPV vs IRRMutually Exclusive ProjectsNPV moreIRR lessNPV lessIRR moreHow to decide ???
  17. 17. NPV vs IRRFind value of “i”Project A-1000 000+350 000/(1+i)^1+400 000/(1+i)^2+500 000/(1+i)^3+650 000/(1+i)^4+700 000/(1+i)^5Project B-800 000+ 600 000/(1+i)^1+400 000/(1+i)^2+300 000/(1+i)^3+200 000/(1+i)^4+200 000/(1+i)^5i = 29.165% crossover point-100 000+ 350 000/(1+29.165)^1 + …=170 981NPV crossover point = 170 981
  18. 18. NPV & IRR903,021562,21436% 42%Crossover point29.165%170,981NPVDiscount RateMutually Exclusive Projects
  19. 19. Bonus QuestionSeth Bullock(Owner)Most spreadsheets do not havebuilt-in formula to calculate thepayback period.Write a VBA script that calculatesthe payback period for a project !!
  20. 20. Bonus QuestionPayback period = Amount invested ⁄ Expected annual cash inflow*When the periodic cash inflows are unequal, “Net cash inflows”have to be summed up until the amount invested in recovered.
  21. 21. VBA ScriptFunction PAYBACK(invest, finflow)Dim x As Double, v As DoubleDim c As Integer, i As Integerx = Abs(invest)i = 1c = finflow.CountDox = x - vv = finflow.Cells(i).ValueIf x = v ThenPAYBACK = iExit FunctionElseIf x < v ThenP = i - 1Z = x / vPAYBACK = P + ZExit FunctionEnd Ifi = i + 1Loop Until i > cPAYBACK = "no payback"End Functioninvest and finflow get the values of Investment and Cashinflow from ExcelDim allocates space in the memory for created variableAbs() function gets the absolute value of investvariable i is to count the number of payback yearsfinflow.Count counts the number Cash inflowsEnter a loop that calculates the payback periodfinflow.Cell get the amount of cash inflow in each cell inthe excel file, the value will be assign to variable v
  22. 22. VBA Script (cont’d)Function PAYBACK(invest, finflow)Dim x As Double, v As DoubleDim c As Integer, i As Integerx = Abs(invest)i = 1c = finflow.CountDox = x - vv = finflow.Cells(i).ValueIf x = v ThenPAYBACK = iExit FunctionElseIf x < v ThenP = i - 1Z = x / vPAYBACK = P + ZExit FunctionEnd Ifi = i + 1Loop Until i > cPAYBACK = "no payback"End Functionif the invested value is equal to cash inflow valuethen i = 1 will be returned as the number of payback yearsif the invested amount is less than the cash inflows, then Formula 1will be performed, this and the result will be returned as thenumber payback yearsthis loop makes sure that all the Cash inflows have been consideredand summed up in the excel file.If the amount invested is more than the Cash inflows (x > v) thenthere will be no payback and the message will be returned to theuser
  23. 23. Company Cash FlowYear Cash Flow0 - $400,000,0001 85,000,0002 90,000,0003 140,000,0004 180,000,0005 195,000,0006 130,000,0007 95,000,0008 60,000,0009 -95,000,000The total investment and cash flows are asfollow:
  24. 24. VBA Running in Ms Excel
  25. 25. Seth Bullock(Owner)Dan Dority(Geologist)Alma Garrett(CFO)Thank You
  26. 26. LOGOLOGOBack-Up Slides
  27. 27. Payback PeriodYear Cash outflow Cash Inflow Payback0 -$400,000,000 -$400,000,0001 $85,000,000 -$315,000,0002 $90,000,000 -$225,000,0003 $140,000,000 -$85,000,0004 $180,000,0005 $195,000,0006 $130,000,0007 $95,000,0008 $60,000,0009 -$95,000,00085,000,000 / 180,000,000 = 0.47Payback period = 3.47 years
  28. 28. Discounted Payback PeriodYear Discounted Cash outflow Discounted Cash Inflow Payback0 -$400,000,000 -$400,000,0001 $75,892,857 -$324,107,1432 $71,747,449 -$252,359,6943 $99,649,235 -$152,710,4594 $114,393,254 -$38,317,2055 $110,648,2376 $65,862,0467 $42,973,1758 $24,232,9949 -$34,257,95238,317,205 / 110,648,237 = 0.35Payback period = 4.35 years

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