zambezi

7. Zambezi Mines can produce 100,000 pounds of copper in a year from now. Managers of Mines forecast two possible outcomes of copper prices at the end of first year: $1.50 per pound if demand is low and $2.50 if the demand is high. The current price of copper is $2.00 per pound. The extraction costs are $2.10 per pound and the one year risk free interest rate is 7 percent. Assuming that all the production decision and extraction is made at the end of the year, find the value of the mine