Question

Calculate NPV and advise about investment decision A small scale mining firm, Gold dust Ltd, wants to take a closer look at their financial position. They want to invest in a project to improve their operations. Their alternatives are “project innovation”; which has the potential to increase the yield of each shaft that they operate and “project improvement”; which is estimated to result in significant productivity and efficiency gains of their current operations. The current cost of capital as well as the interest rate is 15%. Using the information in the tables below, calculate the following; The payback period for both the innovation and improvement projects. The net present value of both the innovation and improvement projects. Advise Gold dust Ltd which project they should invest in based on the results of the abovementioned calculations and the nature of the projects.

Answer 1

I understand that you want to calculate the payback period and net present value (NPV) for two projects, "project innovation" and "project improvement," to advise Gold Dust Ltd on which project they should invest in. However, you haven't provided the specific financial data (initial investment, cash flows, etc.) for each project. To perform the calculations, I would need the following information for each project:

1. Initial investment for each project.
2. Expected cash flows for each year of the project's duration.
3. The salvage value or final cash flow at the end of the project.
4. The current cost of capital or discount rate (which you've mentioned is 15%).

Once I have this information, I can help you calculate the payback period and NPV for both projects and provide advice on which project Gold Dust Ltd should invest in based on the calculated results. Please provide the relevant financial data for both projects so that I can assist you further.