Advanced Financial Management: Valuing an Abandoned Coking Coal Mine.

You are assessing the value of an abandoned coking coal mine in New Zealand, which still have significant deposits. A mining expert’s report suggests that there might be 10 million tonnes of coking coal in the mine still, and that the cost of reopening the mine will be NZD$100 million.Assume that, if the owner decides to develop this mine, the NZ$100 million will be spent at year 0, and all the operational cash flows occur at the end of each year from year 1 to year 10. The annual production is estimated to be 1 million tonnes, and the nominal price of coking coal is expected to increase by 4% per year. (Hint: assume the asset to be a dividend paying stock with a dividend yield of 10%). The price of coking coal per tonnes is NZD$55 and the average cash production cost is expected to be around NZD$50 per tonne at the end of year 1. You can ignore tax and calculate project cash flows as The production cost is expected to grow at 4% per year, once initiated. The annualised standard deviation in asset values of comparable coking companies is 30% (in New Zealand dollar terms), and the 10-yearNew Zealand riskless bond yield is estimated to be 6% p.a..

Requirements:

  • Estimate the value of the mine using static NPV analysis. Assume that all cash flows occur at the year end and a Weighted Average Cost of Capital (WACC) of 10%.Show your valuation model as Appendix 3(1) (10 marks)
  • Estimate the value of the mine based on the Black Scholes Option Pricing Model. Show your detailed steps and result in the main text (15 marks)
  • How would you explain the difference between the two values from (1) and (2) above? Answer the question in the main text. (word limit: 60)  (5 marks)

 

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees


We value our customers, and so ensure that our papers are 100 percent original. Our Team of professionals does not miss the mark; they ensure that step by step each paper is written uniquely. We never duplicate or work as we compare papers rest assured. We deliver our work a day before time to ensure that you don’t miss your deadlines. It is not only doing the work but delivering it at the right time. We capture the consequences of late remittances. .

Money-back guarantee

We value customer satisfaction here at popularessaywriters.com and make sure that you get the best value for your Money. It happens that sometimes you can pay twice for your order or may want to cancel it, or you feel that it doesn’t meet your requirements; our money back guarantee will give you the opportunity to get back your money. We will also refund 100% of money paid double. In case your paper does not satisfy your requirements , we request that you notify us via writing within 2 days otherwise on the third day we will assume that you have been satisfied. Do all your correspondences through our email address popularessaywriters@gmail.com.

Read more

Zero-plagiarism guarantee

At popularessaywriters.com, our professional writers know the consequence plagiarism does for our clients. We have updated software’s such as article checker and copyscape to check for originality of the custom papers before submission of the final paper to the you. Our guarantee to the customer is that we will write 100% original papers for them that are quality, timely and of low cost. We have experienced professional and competent PhD writers who will write quality custom papers for you..

Read more

Free-revision policy

. At popularessaywriters.com, we are proud to provide top-quality Essay writing service to our esteemed customers. We are ready to take up that challenging academic assignment that is giving you sleepless nights and simplify it for you according to your desired requirements. We are willing to revise your paper if it does not meet your requirements. At popularessaywriters.com, we do not compromise with quality; thus, we offer unlimited free revisions until the customer is satisfied with their custom paper. Our unlimited free revision services are provided under the following terms:.. .

Read more

Privacy policy

Popularessawriters.com knows that client’s information is an essential tool for our company. It means that whatever the client requests from our service is kept strictly confidential. It means that whoever writes for this company understands the terms and conditions hence you should not be worried because you will never see your work somewhere else...

Read more

Fair-cooperation guarantee

Rest assured that we will always be attentive to your needs and requirements. We belief in the phrase treat your neighbour as you would want them to treat you. We leave nothing to chance and always look forward to a good interaction with each other.. .

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency