Problem $5-26$ Calculating IRR

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

$$3,400,000$ to open and will have an economic life of $11$ years. It will generate a cash

inflow of $$445,000$ 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 $$500,000$ at the end year $11.$

a$.$ What is the IRR for the gold mine? $($Do not round intermediate calculations and enter

your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

IRR

$\%$

b$.$ The Utah Mining Corporation requires a return of $8$ percent on such projects. Should

the mine be opened?

Yes

No