Question
Colorado Mining, Inc. and Tanzania Exploration, Ltd. are separate firms that are both considering a new gold exploration project. Colorado Mining is in the actual
Colorado Mining, Inc. and Tanzania Exploration, Ltd. are separate firms that are both considering a new gold exploration project. Colorado Mining is in the actual gold mining business and has an after-tax cost of capital of 9.8 percent. Tanzania Exploration is in the precious gem retail business and has an after-tax cost of capital of 8.4 percent. The project under consideration has initial costs of $675,000 and anticipated annual cash inflows of $82,000 a year for ten years. Which firm(s), if either, should accept this project?
both Colorado Mining and Tanzania Exploration | ||
neither Colorado Mining nor Tanzania Exploration | ||
Colorado Mining only | ||
Tanzania Exploration only | ||
cannot be determined without further information |
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