A Korean Auto-Part Supplier Is Evaluating an Investment Project to Build

question 3

Essay

A Korean auto-part supplier is evaluating an investment project to build a manufacturing plant close to Kia
Automobile Assembly Plant near West Point, Georgia. The supplier can obtain a 1-year option to buy the
required parcel of land near West Point area and if the land is purchased the price would be $1,500,000. The
land option, if purchased, would expire 1-year from now. The supplier has two years to make a decision on
whether to build the plant and start operations, once the land was purchased. The required capital investment
would be $5,000,000. They estimate that the land, if purchased, could be sold for 110% of its purchase price
anytime over next two years.
What would the company be willing to pay for the combined value of the land option?

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Definitions:

Nuclear Material

Substances that emit radiation, used in energy production, medicine, and atomic weapons.

Depleted Uranium

Depleted uranium is uranium mainly consisting of the isotope uranium-238, having a lower content of uranium-235 than natural uranium, commonly used in military applications and for counterweights.

Uranium Isotope

Variants of the uranium atom with the same number of protons but differing numbers of neutrons, including uranium-235 and uranium-238, significant in nuclear power and weaponry.

Half-Life

The time required for half the quantity of a substance to undergo a decay process or transformation.