When to harvest an existing asset: Anaconda Manufacturing Company currently owns a mine that is known to

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When to harvest an existing asset: 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 cost of capital is 10 percent, what is the optimal time for Anaconda to sell the mine?

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Fundamentals Of Corporate Finance

ISBN: 9781119795438

5th Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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