Question

Dakota Mining is considering operating a strip mine, the cost of which is $ 4.4 million. Cash returns will be $ 27.7 million, all received at the end of the first year. The land must be returned to its natural state at a cost of $ 25 million, payable after two years. What is the project’s internal rate of return?

Required:
a. Should the project be accepted if the market rate of return is 8 percent?
b. If the market rate of return is 14 percent? Explain your reasoning. Source: R. Watts.



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  • CreatedDecember 15, 2014
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