Get instant access to this case solution for only $19

Fortune Minerals The NICO Project Case Solution

Solution Id Length Case Author Case Publisher
2110 605 Words (4 Pages) Chris Sturby, Melissa Jean Ivey Publishing : 9B11B012
This solution includes: A Word File A Word File and An Excel File An Excel File

In the year 2007, the NICO project has shown negative NPV values for all scenarios of the interest rates. In the year 2007 the expected metal prices and quantity of output are low as compared to the year zero investment required for the project as given in the case study. This indicates that for the year 2007 Fortune Minerals will incur a loss if they decide to go ahead with the project, this is because of negative Net Present Values.

Following questions are answered in this case study solution

  1. Answer 1 & 2: Net Present Value (NPV) and Sensitivity Analysis

  2. What is your recommendation for the Project and why?

11637043338.png

Case Analysis for Fortune Minerals The NICO Project Case Solution

1. Answer 1 & 2: Net Present Value (NPV) and Sensitivity Analysis

The following calculations assume that Year 1& 2 Cash Flows and Year 3 to 15 have been discounted to Year 1 and Year 2 respectively. 

 

Gold

Cobalt

Bismith

 

At January 2007

oz

Pounds

Pounds

 

Metal Price

$525

$16.50

$4.50

 

Year 1 & 2 Output

69000

3250000

3230000

 

Year 3 to 15 output

24000

3250000

3230000

 

 

 

 

 

Sum of costs and cash flows

Capital Costs of Mining Year 0

 

 

 

($215,200,000)

Year 1 & 2 Cash Flows

$36,225,000

$53,625,000

$14,535,000

$104,385,000

Year 3 to 15 Cash Flows

$12,600,000

$53,625,000

$14,535,000

$80,760,000

 

 

 

 

 

Interest Rate

PV

NPV

IRR

NPV in Canadian Dollars

10%

$161,639,256.20

($53,560,743.80)

-10%

($63,762,790.24)

9%

$163,740,131.30

($51,459,868.70)

 

($61,261,748.45)

8%

$165,891,460.91

($49,308,539.09)

 

($58,700,641.78)

7%

$168,094,986.46

($47,105,013.54)

 

($56,077,397.07)

 

 

Gold

Cobalt

Bismith

 

At January 2008

oz

Pounds

Pounds

 

Metal Price

$850

$40.00

$15.00

 

Year 1 & 2 Output

70000

3460000

3590000

 

Year 3 to 15 output

24000

3460000

3590000

 

 

 

 

 

Sum of costs and cash flows

Capital Costs of Mining Year 0

 

 

 

($240,200,000)

Year 1 & 2 Cash Flows

$59,500,000

$138,400,000

$53,850,000

$251,750,000

Year 3 to 15 Cash Flows

$20,400,000

$138,400,000

$53,850,000

$212,650,000

 

 

 

 

 

Interest Rate

PV

NPV

IRR

NPV in Canadian Dollars

10%

$404,607,438.02

$164,407,438.02

60%

$160,868,334.65

9%

$409,946,553.32

$194,746,553.32

 

$190,554,357.46

8%

$415,414,951.99

$200,214,951.99

 

$195,905,041.09

7%

$421,017,119.40

$205,817,119.40

 

$201,386,613.89

2. What is your recommendation for the Project and why?

To choose which of the projects the Fortune Minerals should choose, NPV rule applies as stated below:

Get instant access to this case solution for only $19

Get Instant Access to This Case Solution for Only $19

Standard Price

$25

Save $6 on your purchase

-$6

Amount to Pay

$19

Different Requirements? Order a Custom Solution

Calculate the Price

Approximately ~ 1 page(s)

Total Price

$0

whatsapp chat icon

Hi there !

We are here to help. Chat with us on WhatsApp for any queries.

close icon