Multiple Choice
USGOLD Company has an opportunity to invest in a gold mine. The initial investment is $250 million. Analysts estimate that the mine will produce 100,000 ounces of gold per year for the next 10 years. The extraction cost of gold is $150 per ounce and is expected to remain at that level. The current price of gold is $600 per ounce and is expected to increase 4 percent per year for the next 10 years. What is the NPV of the project at a discount rate of 10 percent? (Ignore taxes.)
A) −$3.8 million
B) $240.8 million
C) $257.8 million
D) $84.9 million
Correct Answer:
Verified
Correct Answer:
Verified
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