A mining project you need to invest $ 1.8 million and you get back annual cash flows

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A mining project you need to invest $ 1.8 million and you get back annual cash flows of $ 1 million for 3 years. After that, the project is going to end; so you are required to expend $ 0.8 million in soil restauration in year 4. The required return is 12%.

A) Find one of the project's IRR.

B) How many IRR's are possible to find for this project? Explain.

C) Based on IRR, would you approve this project? Is the project acceptance based on IRR necessarily correct? Explain.

D) Calculate the Profitability Index for this project. Would you accept the project based on Profitability Index? Why? Justify.

Related Book For answer-question

Fundamentals of corporate finance

ISBN: 978-0470876442

2nd Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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Posted Date: Oct 30, 2020 11:49 AM

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A mining project you need to invest $ 1.8 million and you get back annual cash flows

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Part a Internal Rate of ReturnIRR is the rate at which disocunted cashinflows is equal to the discou... View the full answer

Fundamentals of corporate finance

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