Question

A mining company is deciding whether to open a strip mine, which costs $2 million. Cash inflows of $14 million would occur at the end of Year 1. The land must be returned to its natural state at a cost of $11 million, payable at the end of Year 2.

1. Should the project be accepted if WACC = 10%?
   -Select-Yes No
   
   Should the project be accepted if WACC = 20%?
   -Select-YesNoItem 3
2. 
   
3. Think of some other capital budgeting situations in which negative cash flows during or at the end of the project's life might lead to multiple IRRs. The input in the box below will not be graded, but may be reviewed and considered by your instructor.
   
4. 
   
5. What is the project's MIRR at WACC = 10%? Round your answer to two decimal places. Do not round your intermediate calculations.
   %
   
   d. What is the project's MIRR at WACC = 20%? Round your answer to two decimal places. Do not round your intermediate calculations.
   %

Answer 1

NPV at 10%	1.64
NPV at 20%	2.03

Situations when there will be multiple IRRs are when the project has non-conventional cash flows. The number of IRRs will be equal to the number of times the sign changes in the cash flow table.

MIRR at 10%	17.84%
MIRR at 20%	32.02%

WORKINGS as per excel