You own a uranium mine, and the price of uranium is expected to increase at a rate of 3 percent per year. The cost of capital for your company is 15 percent, and you are evaluating whether or not to begin harvesting the element. The correct choice is to begin harvesting immediately if the current NPV of the project is positive.

Question

Quizplus · Accepted Answer

Since the price of uranium is expected to increase at a rate of 3 percent per year and the cost of capital for the company is 15 percent, the net present value (NPV) of the project is likely to be positive. As a result, it is the correct decision to begin harvesting uranium immediately if the current NPV of the project is indeed positive.

You Own a Uranium Mine, and the Price of Uranium