OPTION B

Please answer carefully. Kindly show all the necessary steps. Thanks in advance

1.5 You are the mine manager of Mine X and you want to expand your operations. The feasibility study shows that you have two options to consider. Option A is to sell your product to a local consumer. Option B is to export your product. The feasibility study yielded the following results for Options A and B. Option A 80 million tons R1 000 million 8 million tons per year Total reserve base Capital required Mining rate Yield 100% Production cost Sales price R35,00 ROM per ton R80,00 per ton 30% Tax rate NPV 47,09 million IRR 22% 80 million tons R2 000 million 8 million tons per year Total reserve base Capital required Mining rate Yield 70% Production cost Beneficiation cost Transport cost Sales price Exchange rate Tax rate NPV R192 million IRR 23% R35,00 per ROM ton R45,00 per ROM ton R30,00 per sales ton US$ 40 per ton R7,00 per US$ 30% 1.5.1 Which option will you choose? Give reasons for your answer. 1.5.2 What is the payback period in years for both options? (2)