You are considering constructing a new plant in a remote wilderness area to process the ore from a planned mining operation. You anticipate that the plant will take a year to build and cost $104 million upfront. Oncebuilt, it will generate cash flows of $18 million per year starting two years from today. In 21 years, after its 20th year ofoperation, the mine will run out of ore and you expect to pay $256 million to shut the plant down and restore the area to its pristine state. Using a cost of capital of 13%:

a. What is the NPV of theproject?

b. Is using the IRR rule reliable for thisproject? Explain.

c. What are the IRRs of thisproject?

a. What is the NPV of theproject?

The NPV of the project is $

nothing

million. (Round to one decimalplace.)

b. Is using the IRR rule reliable for thisproject? Explain.(Select the best choicebelow.)

A.

No, the IRR rule is notreliable, because the project has a negative net present value.

B.

Yes, the IRR rule isreliable, because the project has a negative net present value.

C.

Yes, the IRR rule isreliable, because the project has a negative cash flow that comes after the positive ones.

D.

No, the IRR rule is notreliable, because the project has a negative cash flow that comes after the