In: Finance
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.
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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
AT WACC = 10%, MIRR = LOWER THAN 10%, SO BOTH MIRR AND NPV TALLIES
BUT AT WACC = 20%, MIRR IS HIGHER THAN WACC SO MIRR AND NPC DOES NOT TALLY