Question: Strip Mining Inc. can develop a new mine at an initial cost of $6 million. The mine will provide a cash flow of $31 million

Strip Mining Inc. can develop a new mine at an initial

Strip Mining Inc. can develop a new mine at an initial cost of $6 million. The mine will provide a cash flow of $31 million in 1 year. The land then must be reclaimed at a cost of $29 million in the second year. a. What are the IRRs of this project? (Enter your answers in ascending order. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) RR 1 IRR 2 b. Should the firm develop the mine if the discount rate is 18%? 28%? 280%? 320%? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.) Discount Rate 18% 28% 280% 320% NPV Develop? million million million million Strip Mining Inc. can develop a new mine at an initial cost of $6 million. The mine will provide a cash flow of $31 million in 1 year. The land then must be reclaimed at a cost of $29 million in the second year. a. What are the IRRs of this project? (Enter your answers in ascending order. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) RR 1 IRR 2 b. Should the firm develop the mine if the discount rate is 18%? 28%? 280%? 320%? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.) Discount Rate 18% 28% 280% 320% NPV Develop? million million million million

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