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Assessing the Viability of Building a New Refinery or Outsourcing Supply of Ore for Kidman Resources

   

Added on  2022-11-24

10 Pages1590 Words229 Views
BUSINESS FINANCE
INDIVIDUAL ASSIGNMENT
Assessing the Viability of Building a New Refinery or Outsourcing Supply of Ore for Kidman Resources_1
1
EXECUTIVE SUMMARY
In order to meet a demand of 5000 tons of lithium hydroxide for the next three years to Tesla
Inc., Kidman Resources is considering two options: either to build a new refinery from scratch or
to outsource their supply ore to BHP Ltd (Thompson, 2018).
The Net Present Value is one of the ways that may be used to assess whether a project is
worthwhile or not. In this scenario, it can be used to appraise the two options. The proposal with
the largest (and positive) NPV should be selected.
Assessing the Viability of Building a New Refinery or Outsourcing Supply of Ore for Kidman Resources_2
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TABLE OF CONTENTS
EXECUTIVE SUMMARY .................................................................................................................................. 1
TABLE OF CONTENTS..................................................................................................................................... 2
1. Kidman’s WACC .................................................................................................................................. 3
2. NPV calculations -Alternative 1- Building Refinery ............................................................................ 3
3. NPV calculations- Alternative 2 Outsourcing the supply of ore ........................................................... 4
4. Recommendations ................................................................................................................................. 5
5 An Analysis of Beta risk ........................................................................................................................ 6
References .................................................................................................................................................... 7
Appendix ....................................................................................................................................................... 8
Assessing the Viability of Building a New Refinery or Outsourcing Supply of Ore for Kidman Resources_3

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