The Aldo Mining Corporation is set to open a gold mine near Edmonton. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $2,400,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $345,000 at the end of the first year, and the cash inflows are projected to grow at 8 percent per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $400,000 at the end of year 11.

a. What is the IRR for the gold mine?

b. The Aldo Mining Corporation requires a 10 percent return on such undertakings. Should the mine be opened?