Question: A mining company is deciding whether to open a strip mine with an initial outlay at t = 0 of $2.5 million. Cash inflows of

 A mining company is deciding whether to open a strip mine

A mining company is deciding whether to open a strip mine with an initial outlay at t = 0 of $2.5 million. Cash inflows of $13 million would occur at the end of Year 1. The land must be returned to its natural state so there is a cash outflow of $11 million, payable at the end of Year 2. a. Select the project's NPV profile. A B D NPV (Millions of Dollars 3 NPV (Millions of Dollars 3 2. 2.5 NPV (Millions of Dollars 3 2.5 2 1.5 1 0.5 0 0.5 NPV (Millions of Dollars 2.5 2 1.5 1 0.5 2 1.5 1 0.5 1.5 1 0.5 0.5 0.5 SHEHEHE 100 200 300 +++0.5 +0.5 100 200 300 400 100 400-500 WACC% 200 300 400 100 200 300 400 500 WA CC(%) 500 WA CC(% 500 WA CC(%) The correct sketch is -Select- b. Should the project be accepted if WACC = 10%? -Select- Should the project be accepted if WACC = 20%? -Select- c. What is the project's MIRR at WACC = 10%? Do not round intermediate calculations. Round your answer to two decimal places. % What is the project's MIRR at WACC = 20%? Do not round intermediate calculations. Round your answer to two decimal places. % Does MIRR lead to the same accept/reject decision for this project as the NPV method? -Select- Does the MIRR method always lead to the same accept/reject decision as NPV? (Hint: Consider mutually exclusive projects that differ in size.) -Select

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!