Rough Cut Diamond PtyLtd is a regional supplierof commercial-grade diamonds in Asia Pacific. Thecompany is considering to secure its supply chain by investing in a diamond mining operation. Two countries have been identified for this venture - Australia and SierraLeone.The company's plan 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 thediamond mining industry in certain countries. Their concerns are largely influenced by issues that leading to and surrounding theKimberly Process. The board of directors of the company also concern on how the investors react on if this project goes through.

Required

Evaluate the proposal. Your answer should include the financial and non-financial factors.