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You own an unused gold mine that will cost $100,000 to reopen. If you open the mine, you expect to extract 1,000 ounces of gold a period for each of the next three periods. After that the deposits will be exhausted. Gold price is currently $500 an ounce. At the beginning of each subsequent period is equally likely to rise or fall by $50 from the previous period. The extraction cost is $460 an ounce. If you raise the capital you need to reopen by issuing shares, shareholders expect a 10% return. If you borrow, the bondholders require a 7% return. Should you open the mine? Show your work. You may answer the question in aspreadsheet. Upload your spreadhseet.
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