PLEASE SHOW ALL WORK Question 7.

PLEASE SHOW ALL WORK Question 7.  (15 points) Marcal Corporation is consideringa 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%.

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 willbe $9 million for 4 years and a 40% change CFs will be $5 million for 4years.  Should the company proceed withthe 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 newproject.

Marcal Corporation is consideringa gold mining project would cost $15 million today and generate positive cash flows oyears.The project’s cost of capital is 12%. Intial InvestmentCsah flow of The…

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