1) Evaluate the financial condition of New Earth Mining. Is the firm doing well as it considers this diversification project in South Africa? Or is the firm on shaky ground?
(2) Explain the financing arrangement. It’s complicated, but not so bad taken piece-by-piece. What role does China, Japan, and South Korea play? What other financing arrangements has the firm established?
(3) How does the financing arrangement likely reduce New Earth’s political risk in South Africa?
(4) You’re given four different approaches to valuing this investment. (And I super like this part of the case, because it’s real: Capital projects rarely get evaluated in one simply way, just like a textbook problem.) Make sure you understand each approach and can confirm the resulting NPV.
(5) What kind of evaluation do you get when you apply APV, as we have done in class? This is a fifth approach to the investment.
(6) What do you recommend the company do and why?