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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.
Summarize the key statistics for the stock and the industry (choose 8 items you believe informative, such as P/E ratio, market capitalization, dividend yield, ROE, sales etc.tion..
Equal division divides M equally over the SKUs in N. Thus, There are two main reasons for including this simplistic approach. First, the approach is used by the case compan
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QUESTION Assume Venture Healthcare sold bonds that a 10 year maturity, a 12% coupon rate with annual payments, and a $1,000 par value. a. Suppose that two years after the bo
Consider Gavin, a new freshman who has just received a Stafford student loan and started college. He plans to obtain the maximum loan from Stafford at the beginning of each year.
Market-Adjusted and Two-Factor Models - Event Study As mentioned previously, you can use several alternative models to calculate a security's expected return. The market-adjus
Corporate restructuring Corporate restructuring entails any fundamental change in a company's business or financial structure, developed to raise the company's value to shareho
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