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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 .95 cents per pound. The required return for copper mining projects is 10% and the riskless rate of interest (continuously compounded) is 5%.Determine thenet present valueNPVof GeKay's potential $1.25m mining venture with standard Discount Cash Flows (DCF) analysis and compare it to the NPV from Real Options analysis.
#questioCost of equity and corporate taxesn..
Critically appraise how companies set their dividend policies, and explain the factors that a company will consider in setting its dividend policy and in determining the level of d
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Ask questThe credit term "2/45 net 90" indicatesion #Minimum 100 words accepted#
Calculate the cost of capital for the project? (a) Describe how the weighted cost of capital for an MNC can be calculated? (b) Assume that a foreign project has a beta of 0.
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P/E Ratio: When it comes to valuing stocks, the price/earnings ratio is one of the highly oldest and most frequently used metrics. It is more than a measure of a company's past pe
Explain in detail, using the time value of money,if its better to receive a 685k tax deduction in 1 year vs 17,564.10 each year for 39 years.(inflation, opportunity cost, etc...) T
Question: (a) With the help of illustrative and numerical examples differentiate fully speculation and arbitraging in the context of foreign exchange. (b) Shirley, a trade
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