I can't seem to get the right ending value for this problem. Please help. Thank you!

Renfree Mines, Inc. owns the mining rights to a large tract of land in a mountainous area. The tract contains a mineral deposit that the company believes might be commercially attractive to mine and sell. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area:



Cost of equipment required
$859,000

Net annual cash receipts
$223,000*

Working capital required
$103,000

Cost of road repairs in two years
$61,000

Salvage value of equipment in four years
$200,000

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*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.


It is estimated that the mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's required rate of return is 16%. (Ignore income taxes.)

To determine the appropriate discount factor(s) using tables, click here to view Exhibit 14B-1 and Exhibit 14B-2. Alternatively, if you calculate the discount factor(s) using a formula, round to three (3) decimal places before using the factor in the problem.

1. Determine the net present value of the proposed mining project.

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