Answer:
Precious Metals should accept the project since its NPV is greater than 0.
Explanation:
Find the Net present value of the project using the different discount rates for Deep Mining and Precious Metals companies. You can use a financial calculator with the following inputs;
<u>Deep Mining </u>
Note: use "CF" key on calculator
Initial investment; CFO = -950,000
Yr1 cashflow CF1 = 165,000
Frequency; F01 = 12 (because it is recurring for 12 years)
Interest rate ; I/Y = 16.2%
then CPT NPV = -$99,553.49
<u>Precious Metals; </u>
Initial investment; CFO = -950,000
Yr1 cashflow CF1 = 165,000
Frequency; F01 = 12 (because it is recurring for 12 years)
Interest rate ; I/Y = 13.4%
then CPT NPV = $9,059.05
Therefore,Precious Metals should accept the project since its NPV is greater than 0.
