Gold Rush Practice Exam

The idea being tested is break-even grade—the ore grade where the project’s net present value equals zero. This is the best choice because NPV zero means the discounted cash inflows from selling the ore just cover all costs (including initial investment) over the project life; at this point the project is neither making nor losing value in present-value terms. If the ore grade increases, revenues rise and NPV becomes positive; if it decreases, revenues fall and NPV becomes negative. The other statements don’t describe this NPV-based tipping point: profitability in a single year ignores the time value of money and upfront costs; minimum mining cost regardless of price ignores how revenue depends on grade and price; and calling a maximum grade economically infeasible has nothing to do with where NPV equals zero.