Rough Cut Diamond Pty Ltd is a regional supplier of commercial-grade diamonds in Asia Pacific. The company is considering to secure its supply chain by investing in a diamond mining operation. Two countries have been identified for this venture - Australia and Sierra Leone. The company plans to issue bonds and new ordinary shares to raise the money for the investment. Rough Cut estimates the weighted average cost of capital for the project will be at 13%.

The following data are the estimates for the project in these countries.

	Australia	Sierra Leone
Initial investment ($000,000)	10	10
Land lease (years)	5	5
Payback period (years)	5	3
IRR (%)	13.50%	17.25%

The existing shareholders voiced their concerns on issues related to practices in the diamond mining industry in certain countries. Their concerns are largely influenced by issues surrounding the Kimberly Process. The board of directors are aware of these issues and are planning to respond to the investors.

Required

• Evaluate the investment opportunities.
• Provide reasons for your decision taking into account the financial and non-financial factors.