Determine advice the management accordingly

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Reference no: EM133219567

Assignment:

A mining company called Rock Investments has found mineral deposits in the Zambezi valley. The company is considering pursuing the project as a way of enhancing shareholder value. The value of the reserves is estimated at 50 million kilograms, the cost of developing the reserve is estimated at 600 million RTGS and the development lag is two years. The firm has been granted rights to exploit these for the next 20 years and the value of the mineral is currently 12 RTGS. After development, the net production revenue each year will be 5% of the value of reserves. The riskless rate is 8% and the variance in mineral price is 0.03. Determine the value of the project and advice the management accordingly.

Reference no: EM133219567

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