Question

Construction and development of a uranium mine is being considered in order to take advantage of increase nuclear energy production. Construction would cost $450 million, spread evenly over three years (assume end of year cash flows). Production is expected to reach 6 million pounds of ore in the final year of construction, growing at 6 million pounds per year until reaching the maximum production level of 18 million pounds of ore per year. If revenues are $12 per pound, production costs are $5.50 per pound, maximum production lasts 10 years, and remediation costs are $25 million at the end of the mine’s life, what is the present worth of the investment? The MARR is 18%.

Answer 1