-
+1 - 312-224-1615
Get in touch with us
-
support@helpwithassignment.com
Send us an e-mail
Solution Library
Calculation Of Net Present Value With Standard Discount Cash Flow Analysis
Question
Suppose GeKay Inc. has a two-year lease over a small copper deposit; the government acquires all rights to the property at the end of the lease. It is known that the deposit contains eight million pounds of copper. Mining would involve a one-year development phase that would have an immediate (t = 0) cost of $1.25 million.
At the end of the development phase (at t = 1), if GeKay decides to continue and mine the copper, GeKay would then pay all its extraction costs to a subcontractor, in advance, at a rate of 85 cents per pound (8 million pounds).
This amounts to a cash payment of $6.8 million one year from now (at t = 1). GeKay would also then (at t = 1) sell the rights to the copper to be recovered (8 million pounds) to a third party at the spot price of copper at that time. Copper prices follow a process such that percentage price changes are normally distributed with mean 7% and standard deviation 20%; the current price is 0.95 cents per pound.
The required return for copper mining projects is 10% and the riskless rate of interest (continuously compounded) is 5%.
Determine the net present value NPV of GeKay’s potential $1.25m mining venture with standard Discount Cash Flows (DCF) analysis and compare it to the NPV from Real Options analysis.
Summary
The question belongs to Finance and it discusses about calculation of net present value for the mining venture with standard discount cash flow analysis and compare it with the net present value of real options analysis. This has been presented in the solution with detailed calculations.
Total Word Count 347
WHAT OUR STUDENTS SAY
My professor was very strict about plagiarism in all our finance assignment essays. So when I decided to take the help of an online service for help with my finance assignments this was the first concern I had. But with the finance assignment writing experts at TheReliableTutor I have not once had a problem with plagiarism or gotten into any problem with the professor.
Paul Samson Student
From topic selection to questionnaire design, HwA has helped me in every step for my dissertation writing. They incorporated every change asked by my professor and at the end of everything I got excellent grades.
Don Waller Student
I am very particular about deadlines and I needed my stock valuation assignment well before deadline to go through the essay and make sure that it was exactly according to the guidelines that I had given. Most online assignment help providers that I have used had failed in this very step, but the finance assignment expert at HwA delivered the fully completed assignment well before the deadline. The best part was that when I went through the finished assignment I was left with no doubts about the assignment question.
Felicity Chambers Student
Honestly speaking, most of the online essay writing experts, available on the internet, are US based writers. So, naturally their perspectives are different than what we are being taught in our school. The variation in socio-political viewpoints makes critical impact in the arguments presented in an essay. Luckily, HwA has essay writing experts who have not only passed out from schools from New Zealand but also taught there. So, naturally they understood the need of the argumentative essay I needed, and delivered quality work.
Martin Wilson Student
Initially I hesitated but after talking to one of the nursing assignment experts I was overwhelmed by the fact that she is from my university only and knew all our curriculums. I was so relaxed after that as HwA helped me out with all my assignments and helped me learn new things in nursing.
Fiona McGrath Student
Comments
this is a very good website
I have 50 questions for the same test your page is showing only 28
hi can you please help or guide me to answer my assignments. thanks
hi can anyone help or guide me to my assignments. thanks
This solution is perfect ...thanks
Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes
Perfect bank of solution.
great !
thanks for the quick response. the solution looks good. :)
thnx for the answer. it was perfect. just the way i wanted it.
works fine.