Calculate the projects NPV if the company proceeds now

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Question - Marcal Corporation is considering a gold mining project would cost $15 million today and generate positive cash flows of $6 million a year at the end of each of the next 4 years. The project's cost of capital is 12%.

Required -

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 1 year. The company believes the cost would be $18 million in 1 year. It estimates there is a 60% change CFs will be $9 million for 4 years and a 40% change CFs will be $5 million for 4 years. Should the company proceed with the project now or wait 1 year until it has better information?

c. Apart from the calculations above, discuss 3 qualitative factors that the company should consider when making its decision on accepting the new?

Reference no: EM132643692

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