Calculate the after-tax cash flows atcf for time zero and


A corporationrecently acquired a silver mineandspent $15,000,000 in time zero to acquire mineral rightswhich contains an estimated 50,000,000 ounces of silver,the resource has been categorized as a proven resource. Themine will produce 3,000,000 ounces of silver in year 1 and 6,500,000 ounces in year 2. The selling price per ounce of silver is hedged at $16.50 per ounce on the futures market for both years 1 and 2. Withthe land acquisition contract your company must pay a 2.0% royalty on gross revenueeach year. Operating costs for the mine will be $25,000,000 in year 1, and $45,000,000 in year 2. The corporation will spend $35,000,000 on mine development in time zeroand another $10,000,000 in year 1. They will alsospend$25,000,000 on mine equipmentincurred in timezero.Depreciate the mine equipment starting in year 1 with 100% bonusdepreciation in the first yearassuming the assets will beplaced in servicecloser to theyear 1 time frame. Assumethe project will continue into the futurebeyond year 2 soneglect any write-offs, salvage, or reclamation. Start all amortization schedules in the year the costs are incurred with a ½ year or 6-month convention. Assume you are in a stand-alone environment where any corporate loss will need to be carried forward and used against future project taxable income.Remember your corporate loss forward deduction will be limited to 80% of your taxable income for that specific year.Using an effective federal and state tax rate of 25%, calculate the After-Tax Cash Flows (ATCF) for time zero and yearsone and two. No economics are requested, the problem allows you to practice computing the appropriate ATCF only.

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Financial Management: Calculate the after-tax cash flows atcf for time zero and
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