The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the
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The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $3.5 million to open and will have an economic life of 11 years. It will generate a cash inflow of $605,000 at the end of the first year, and the cash inflows are projected to grow at 6 percent per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $575,000 at the end of Year 11.
a. What is the IRR for the gold mine?
b. The company requires a return of 13 percent on such projects. Should the mine be opened?
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Related Book For
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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