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Paper of Amax

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Submitted By johnsonjafar25
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Question 3: The question asks us at what prices we will be profitable.

This is what we know: For each $100 million invested into a mine, the annualized cost would be $17 million. So basically for every additional $100 million invested into a mine, it will cost an additional $17 million PER YEAR to operate that mine.

What that means is that for: Climax à The Investment was $300 million, which means that it will cost that company $51 million PER YEAR to run that min.

So. $100 million + $100 million + $100 million = $300 million invested Which Means. $17 million to operate + $17 million + $17 million = $51 million So if we want to be profitable each year we must make at least $51 million at Climax Now we use our equation of y = 15x -­‐ 60 or Revenues = 15*Price -­‐ 60. And since we need to make more then $51 million, we set that as our revenue so that à 51 = 15x -­‐ 60, and when we solve for x we get 7.4 So Climax prices must be greater than $7.4 to be profitable.

And then we do the same for Henderson:

$100 million + $100 million = $200 million invested

Which Means. $17 million to operate + $17 million to operate = $34 million So if we want to be profitable each year we must make at least $34 million at Henderson Now we use our equation of y = 13x -­‐ 58 or Revenues = 13*Price -­‐ 58. And since we need to make more then $34 million, we set that as our revenue so that à 34 = 13x -­‐ 58, and when we solve for x we get 7.07 So Henderson prices must be greater than $7.07 to be profitable.

And then we do the same for Kitault:

$100 million invested

Which Means. $17 million to operate

So if we want to be profitable each year we must make at least $17 million at Kitault Now we use our equation of y = 10x -­‐ 60 or Revenues = 10*Price -­‐ 60. And since we need to make more then $17 million, we set that as our revenue so that à 17 = 10x -­‐ 60, and when we solve for x we get 7.7 So Climax prices must be greater than $7.7 to be profitable.

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