Financial Assessment of Kidman Resources: Building a New Machinery or Outsourcing the Supply of Ore

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KIDMAN RESOURCES
(
Student’s Name

KIDMAN RESOURCES (BUSINESS FINANCE)
Executive Summary
We have undertaken this financial assessment of Kidman of the two options
that it can undertake which consists of building a new machinery or outsourcing
the supply of ore. We have assessed both the options by first calculating the
WACC for Kidman based on its debt and Equity, we have also computed the Beta
for the Company based on the Price and Stock Index provided to us. We have
calculated the NPV for both the options to get an idea about which option entails
greater cashflows for the company. We have also done Beta analysis for the
company where we have shown how change in Beta can affect the WACC itself.
All the data has been used to find out the market value for Kidman resources.
Contents

KIDMAN RESOURCES (BUSINESS FINANCE)
PART-A...........................................................................................................................................3
Analysis of WACC......................................................................................................................4
Calculation of NPV......................................................................................................................5
Option 1 – Building a New Refinery.......................................................................................5
Option 2 – Outsourcing the supply of ore...............................................................................5
Recommendation.........................................................................................................................6
PART B...........................................................................................................................................6
Beta Analysis...............................................................................................................................6
Reference:........................................................................................................................................8
Appendix A..............................................................................................................................9
Appendix B............................................................................................................................11

KIDMAN RESOURCES (BUSINESS FINANCE)
PART-A
Australian Kidman Resources entered into an agreement with Tesla (Car
Manufacturer) to provide Lithium which is one of the major ingredient required in
the manufacture of rechargeable batteries. With the signing of this deal the share
price of Kidman rose by 2.8%. The current market price of Kidman’s equity share
is $1.17 each with 405,000,000 ordinary floating in the market making $473.85
million as its market value.