Estimate that still makes the decision to mine worthwhile

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Reference no: EM13911235

A mining company will spend $28 million in order to exploit a low-grade placer deposit of gold ore. They estimate the deposit will produce profits of $6 million per year for six years. They calculate the net present value (NPV) using an estimated cost of capital of 6%. What is the maximum that the cost of capital can deviate from this estimate that still makes the decision to mine worthwhile?

1) 1.60% 2) 1.66% 3) 1.69% 4) 1.72%

Reference no: EM13911235

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