This report provides a comprehensive financial analysis of Rio Tinto's investment project in the Pilbara region, evaluating two expansion options: building a crusher and conveyor, and outsourcing the supply of ore. The analysis includes calculating the Weighted Average Cost of Capital (WACC) using the Capital Asset Pricing Model (CAPM) and incorporating debt, equity, and preference shares. Investment decisions are evaluated using Net Present Value (NPV) calculations, considering initial investments, cash flows, depreciation, and working capital. The report also analyzes the impact of iron ore price fluctuations on project profitability. Ultimately, the report recommends the option that generates the highest value for the company, providing insights into capital budgeting and investment decision-making processes.
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