Marcel corporation is considering a silver mining project, Ask an Expert

Finance

Marcel Corporation is considering a silver mining project would cost $50 million today and generate positive cash flows of $15 million a year at the end of each of the next 5 years. The project's cost of capital is 10%.

a. Calculate the project's NPV if the company proceeds now.

b. The company is fairly confident about its cash flow forecast, but expects to have better price information in 2 years. The company believes the cost will be $55 million in 2 years. It estimates there is a 90% change CFs will be $16 million for 5 years and a 10% change CFs will be $12 million for 5 years. Should the company proceed with the project now or wait 2 years until it has better information?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92745034

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