A Mining Company Will Spend $28 Million in Order to Exploit

Multiple Choice

A mining company will spend $28 million in order to exploit a low-grade placer deposit of gold ore.They estimate the deposit will produce profits of $6 million per year for six years.They calculate the net present value (NPV) using an estimated cost of capital of 6%.What is the maximum that the cost of capital can deviate from this estimate that still makes the decision to mine worthwhile?

A) 1.60%
B) 1.66%
C) 1.69%
D) 1.72%
E) 1.76%