Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. barrick gold, an australian gold mining company, i

Barrick Gold, an Australian gold mining company, is considering re-opening a gold mine at a...

60.1K

Verified Solution

Question

Finance

image

Barrick Gold, an Australian gold mining company, is considering re-opening a gold mine at a cost of $48 million. The re-opening costs are expected to remain constant over time. If the company re-opens the mine today, it can enter into a hedging agreement and secure a net cashflow of $14 million per annum for 5 years. If the company re-opens the mine in one year from now, the company expects to secure a net cashflow of $12 million or $20 million per annum for 5 years with equal probability. Assume the net cashflow starts exactly 1 year after the mine re-opens, and the appropriate cost of capital is 10% per annum. Using the approach discussed in the lecture, the value of the option to postpone the project by one year is closest to (ignore taxes): None of the other answers. O $5.1 million O $6.4 million O $7.6 million

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Biology
1.2K views

A corn breeder has a plant that is dominant for 4 traits that are known to...

Mechanical Engineering
1.2K views

At my work, we often have multiple & different components from multiple suppliers that we use to...

Biology
1.2K views

Generate relative humidity data to answer the questions that follow Degrees Difference Between Wet and...

Biology
1.2K views

African Americans Mexicans Asians All faced segregation and discrimination in society All were hired by...

Physics
1.2K views

Equivalent capacitance between A and B as shown in the circuit will be A Beka...

Physics
1.2K views

A cylindrical vessel of area of cross section A and filled with liquid to a...

Statistics
1.2K views

If np ? 25 and nq ? 25, estimate P(more than 6) with n =...

Algebra
1.2K views

Let a, b, c, d be fixed numbers, and suppose that a?0 and a?1.Which of...

Accounting
1.2K views

Production and sales estimates for March for Robin Co. are as follows: Line Item Description...

Finance
1.2K views

Consider the following balance sheet for WatchoverU Savings Incorporated ($ in millions): ...

Accounting
1.2K views

Pronghorn Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3...

Finance
1.2K views

Suppose that TapDance, incis capital structure features 60 percent equity, 40 percent debt, and that...