A new mineral production project has a market share of 25% in Zambias total annual copper production. The projects cost elements are USD700/ tonne as variable cost and USD 350,000,000/year as fixed costs. This project has a life span of three years with a copper price of USD 3500/tonne registering growth at 5% per year from the commencement year. The annual national copper production is estimated at 500,000 tonnes.

Required

(a) Estimate annual after-tax profits for the project life

(b) Calculate the Net Present Value (NPV) given that the initial capital cost is estimated at USD 100 million on a 10% cost of capital. Based on these calculations, offer decisions on the viability of the project.