Question
In: Finance
A mining company is deciding whether to open a strip mine, which costs $2 million. Cash...
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.
- Should the project be accepted if WACC = 10%?
-Select-Yes No
Should the project be accepted if WACC = 20%?
-Select-YesNoItem 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.
- 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.
%
Solutions
Expert Solution
| 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
jeff jeffy answered 1 year agoRelated Solutions
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A mining company is deciding whether to open a strip mine, which costs $2.5 million. Cash...
A mining company is deciding whether to open a strip mine, which
costs $2.5 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. Find the
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A mining company is deciding whether to open a strip mine, which costs $1.5 million. Cash...
A mining company is deciding whether to open a strip mine, which
costs $1.5 million. Cash inflows of $13.5 million would occur at
the end of Year 1. The land must be returned to its natural state
at a cost of $11.5 million, payable at the end of Year 2. Plot the
project's NPV profile. The correct sketch is . Should the project
be accepted if WACC = 10%? Should the project be accepted if WACC =
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A mining company is deciding whether to open a strip mine, which costs $1.5 million. Cash...
A mining company is deciding whether to open a strip mine, which
costs $1.5 million. Cash inflows of $12.5 million would occur at
the end of Year 1. The land must be returned to its natural state
at a cost of $12.5 million, payable at the end of Year 2.
What is the project's MIRR at WACC = 10%? Round your answer to
two decimal places. Do not round your intermediate
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open a strip mine, which costs $2.5 million. Cash inflows of $14
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to its natural state at a cost of $12.5 million, payable at the end
of Year 2. Plot the project's NPV profile. The correct sketch is .
Should the project be accepted if WACC = 10%? Should the project be
accepted if WACC...
MULTIPLE IRRS AND MIRR A mining company is deciding whether to open a strip mine, which...
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A mining company is deciding whether to open a strip mine, which
costs $2 million. Cash inflows of $13 million would occur at the
end of Year 1. The land must be returned to its natural state at a
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Plot the project's NPV profile.
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