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Dears, please help me to solve this homework, thank you Exercise 4 (20 points) The company K.S. is considering a proposal to open a new
Dears, please help me to solve this homework, thank you
Exercise 4 (20 points) The company K.S. is considering a proposal to open a new gold mine. It estimates that the mine will cost $ 500 million to develop and that in each of the next 10 years it will produce 100,000 ounces of gold at a cost, after mining and refining, of $1,150 an ounce. Although the extraction costs can be predicted with reasonable accuracy, the company is much less confident about future gold prices. Its best guess is that the price will rise by 5% per year from its current level of $1,500 an ounce. At a discount rate of 10%, what will be company's NPV? Should the company invest in the mineStep by Step Solution
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