Question: The UUC Ltd is deciding whether it should go ahead with a new project, a mining venture. The Net Cost of which is Tshs 200
The UUC Ltd is deciding whether it should go ahead with a new project, a mining venture. The Net Cost of which is Tshs 200 million. Net cash inflows are expected to be Tshs 1,300 million, all, coming at the end of year 1. The land must be returned to its natural state at a cost of Tshs 1,200 million, payable at the end of Year 2. (a) Plot the project's NPV profile (Hint: Calculate NPV at k = 0, 10%, 80%, and 450%, and possibly at other k values) (b) Should the project be accepted if k = 10%? If k = 20%? Explain your reasoning. (c) Can you think of some other Capital Budgeting situations in which Negative Cash Flows or at the other end of the project's life might lead to Multiple IRRs? (d) What is the project's MIRR at k = 10%? At k = 20%? Does the MIRR method lead to the same accept/reject decision as the NPV method
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