Anaconda Manufacturing Company currently owns a mine that is known to contain a certain amount of gold.

Question:

Anaconda Manufacturing Company currently owns a mine that is known to contain a certain amount of gold. Since Anaconda does not have any gold mining expertise, the company plans to sell the entire mine and base the selling price on a fixed multiple of the spot price for gold at the time of the sale. Analysts at Anaconda have forecast the spot price for gold and have determined that the price will increase by 14 percent, 12 percent, 9 percent, and 6 percent during the next one, two, three, and four years, respectively. If Anaconda’s opportunity is 10 percent, what is the optimal time for Anaconda to sell the mine?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...