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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.

  1. What is the project's MIRR at WACC = 10%? Round your answer to two decimal places. Do not round your intermediate calculations.
    %

    What is the project's MIRR at WACC = 20%? Round your answer to two decimal places. Do not round your intermediate calculations.
    %

    Does MIRR lead to the same accept/reject decision for this project as the NPV method?
    -Select-Yes or No

    Does the MIRR method always lead to the same accept/reject decision as NPV? (Hint: Consider mutually exclusive projects that differ in size.)
    -Select-Yes or No

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago
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