The Alger Co

question 6

Multiple Choice

The Alger Co. operates a bauxite mine. The mine can produce 800,000 tons a year. The mine is currently closed and will cost $12 million to open it. When should the mine be opened?

• A) At a net bauxite price after extraction/production costs equal to $15.00 per ton before discounting and valuing extended options.
• B) At a net bauxite price after extraction/production costs greater than $15.00 per ton before discounting and valuing extended options.
• C) If the mineable bauxite is available then the mine should be open because the cash breakeven is less than $15.00 per ton.
• D) If mineable bauxite exists at any price close to $15.00 per ton if bauxite prices are high volatile.

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Definitions:

Alternative Fuels

Fuels other than fossil fuels, often produced from renewable resources, used to power vehicles and machinery.

Economically Viable

Capable of generating sufficient income to cover expenses and produce a profit.

Nonrenewable Natural Resources

Natural resources that do not replenish at a sustainable rate within a human lifetime, such as fossil fuels, minerals, and metals.

Productive Inputs

The resources used in the production of goods and services, including labor, capital, and raw materials.