file-308957915(19).docx - Surname 1 Student\u2019s Names Professor Course Date Diamond Energy Resources PT Diamond Energy Resources is an Indonesian mining

file-308957915(19).docx - Surname 1 Student’s Names...

This preview shows page 1 - 2 out of 6 pages.

Surname 1 Student’s Names Professor Course Date Diamond Energy Resources PT Diamond Energy Resources is an Indonesian mining company with interests in coal exploration. Its CEO, Mr. Agus Halim, is on a dilemma on whether the company should acquire a new mine near East Kalimantan. Although this acquisition would significantly increase Diamond’s coal reserves, it would also expose the company to serious financial risk because the coal industry is highly volatile. While coal-mining companies in Indonesia have generally fared well, the risks are significant, especially among small players. Indonesian government tried to stop the decline of coal prices in 2014 by limiting coal production by about 5% when compared to the 2013 output levels. The government was also proposing an increase in coal royalties and an imposition of a windfall profit tax in case coal prices rose dramatically. Additionally, China, which is Indonesia’s largest customer, was threatening to ban the importation of low-grade coal. Compounding these risks was the condemnation of coal mining by Greenpeace. This paper provides an analysis of whether Agus should acquire the mine near East Kalimantan. This paper will use the weighted average cost of capital (WACC), capital asset pricing model (CAPM), and net present value (NPV) to determine the viability of the East Kalimantan mine. The company will use two forms of capital; debt and shareholders’ equity. WACC will
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 6 pages?

  • Winter '16
  • Prof.Abungu

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors