BUS379 week 5 homework and case

Homework (graded) Please complete the following exercises from Chapter 11 of your textbook and post them in the Dropbox. Chapter 11: 4, 7, 17, and 29

 Case Begin working on Case III – Chapter 8 Case, Bullock Gold Mining, page 274, which is due at the end of Week 6.BULLOCK GOLD MININGSeth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company's financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine.Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $650 million today, and it will have a cash outflow of $72 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table on this page. Bullock Mining has a 12 percent required return on all of its gold mines.

Year	Cash Flow
0	?$650,000,000
1	80,000,000
2	121,000,000
3	162,000,000
4	221,000,000
5	210,000,000
6	154,000,000
7	108,000,000
8	86,000,000
9	?72,000,000

QUESTIONS

1.	Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine.
2.	Based on your analysis, should the company open the mine?
3.	Bonus question: Most spreadsheets do not have a built-in formula to calculate the payback period. Write a VBA script that calculates the payback period for a project Chapter 11 . 4. Portfolio Expected Return. You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 11 percent. If your goal is to create a portfolio with an expected return of 12.4 percent, how much money will you invest in Stock X? In Stock Y 7. Calculating Returns and Standard Deviations. Based on the following information, calculate the expected return and standard deviation for the two stocks. ? 17. Using CAPM. A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of .7, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9 percent, what is its beta? d. If a portfolio of the two assets has a beta of 2.3, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain. 29. SML Suppose you observe the following situation: a. Calculate the expected return on each stock. b. Assuming the capital asset pricing model holds and stock A's beta is greater than stock B's beta by .25, what is the expected market risk premium?