Question Four:

You are an investment analyst working for an investment company and you are offered a Zinc field

investment opportunity. If the risk free rate is $2\%,$ using the certainty equivalent method, should your

company invest in it or not? Explain why or why not. $($Refer to Table $1$ below, no decimals are needed$)$

Table $1$

$(1$ mark revenue, $1$ mark processing cost, $1$ mark depreciation, $1$ mark EBIT, $1$ marks NOPAT, $1$ mark adding

back depreciation, $2$ marks NPV$,1$ mark for investment decision and $1$ mark for the investment decision

reason$)$

Marks total$)$

$4\mathrm{.}2$ Explain why an optimistic manager might not accept your analysis $(3$ marks$)$ and how to convince your

sceptical manager $(3$ marks$)?$

FOR THE FIRST PART, PLEASE SOLVE USING ANALYSES TO COVER EACH MARK MENTIONED ETC REVENUE, PROCESSING COSTS