net present value (NPV)
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“Alusaf has an 11% cost of capital and is considering a $1.6b investment today. If it goes ahead, aluminum production will begin in three years. Suppose that the price of Aluminum and the projected costs would be stable indefinitely from that point onward. What aluminum price would you need for the Hillside project to have a positive net present value (NPV)?1 Explain.” (interest rate is the cost of capital of r=11%)
State all assumptions made, and show the formula or method you use to calculate your answer.
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