3 parts of a finance assignment. Please read the case study attached before agreeing on the project. Do only Qns 4,5 and 6.
4.The cash flows of the metallica project are highly sensitive to the geological, technical and economic assumptions that have been made. Use sensitivity analysis to determine the impact on project NPV of a 10% plus or minus change in (a) ore yields (proxied by annual concentrate
production), (b) the $80 million capital cost of the project, (c) the price of metallica, and (d) all mine operating costs. You should provide a summary table listing your results and a description of how these results were obtained. Limit of 200 words.
5. Can the project generate sufficient cash flows to repay interest and principal to the bank during the first six years of production? Limit of 100 words.
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6. A critical factor in the financial evaluation of a mining project is the path of the commodity price. What is the 2019 price of metallica that (a) yields a project NPV of zero, and (b) ensures annual project cash flow is sufficient to meet projected interest and principal payments in all years?In broad terms, what options would Andromeda have for mitigating the commodity
price risk it faces? Limit of 100 words.
In calculating these figures you should continue to assume that the metallica price increases at 2% per annum beyond 2019.
Some important notes:
NPV = 14818420
IRR = 15.39
Project discount rate = 10.29