Evaluate the following statement: 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 firm 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

If the current NPV of the project is positive, it means that the expected cash inflows from the project exceed the initial investment needed to start the project. Given that the price of uranium is expected to increase at a rate of 3 percent per year, it is likely that the project's cash inflows will increase over time. Therefore, starting the project immediately is the correct choice as it will generate positive net present value (NPV) and exceed the cost of capital for the firm, which is an indication of profitability.

Evaluate the Following Statement: You Own a Uranium Mine, and the Price