Question 1 (5 Marks) Dore Gold Mining Corporation (DGM) is a US based mining corporation that has a gold deposit in northern BC which the company is looking into developing. The total estimated cost of building the underground mine is $600 million. The CFO of the company is conducting a financial feasibility study to assess whether the company should develop the project at this time. He observed the long-term expected return on the stock market of 10% where DGMs stock is traded. He also observed the US treasury bills yielding 2%. The project will be financed through a combination of public debt through a bond issue (30%) and common stock/equity (70%). DGM corporate tax rate is 30%. DGM has a beta of 1.8. For the debt portion of the capital, the company is issuing a five-year bond with a 7% coupon. Assume that there are no flotation costs. The project is expected to generate operating cash flow of $250 million per year over the life of the project of five years. The CFO needs your help in the following:

A) Calculate the WACC (2 Marks)

B) Calculate the project Net Present Value (NPV) (1 Mark)

C) Calculate the projects IRR (1 Mark)

D) Is this a good project for the company to take on and why/why not? (1 Mark)