The case Titled 'Molycorp: Financing the Production of Rare Earth Minerals (A)' has been uploaded on the moodle. Each group has to go through the case and answer the following assignment questions.

In case any assumptions are required to be made, you are free to make your own assumptions but clearly mention them while answering the question.

The assignment questions are:

What are the key elements of Molycorp`s business plan? What are the key risks facing Molycorp as it implements its plan?

What is the reasonable leverage ratio for Molycorp? In your opinion is Molycorp currently at its optimal leverage ratio?

Would you invest in Molycorp in August 2012? Why or why not? What are the most important risks that you would take into account in making this decision?

Is Molycorp equity fairly priced at $11.49? What terminal value assumptions would be consistent with an $11.49 share price, assuming the cash flow forecasts in exhibit 9 are reasonable? Assume a market risk premium of 6.0%, a corporate tax rate of 35%, and a debt beta of 0.30 and asset beta of 2.07.

Calculate the value of Molycorp`s bond if the assumed yield to maturity is 11.3% and coupon rate is 6% with 5-year maturity period.