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 $ 99 million upfront. Once built, it will generate cash flows of $ 18 million at the end of every year over the life of the plant. The plant will be useless 20 years after its completion once the mine runs out of ore. At that point you expect to pay $ 261 million to shut the plant down and restore the area to its pristine state. Using a cost of capital of 11 %:

a. What is the NPV of the project?

b. Is using the IRR rule reliable for this project? Explain.

c. What are the IRRs of this project?

(Y) P7-18 (similar to) 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 sh flows of $18 million at the end of every year over the life of the plant. The plant will be useles down and restore the area to s p s ne sae 20 years after its completion once the mine rns out o ore. At that point Using a cost of capital of 11% a. What is the NPV of the project? ou expect to pay S261 mil on to shut the a ul b. Is using the IRR rule reliable for this project? Explain c. What are the IRRs of this project? a. What is the NPV of the project? ial I The NPV of the project is million. (Round to one decimal place.) : S 2: S Enter your answer in the answer box and then click Check Answer. 3: S 2 Pemaining Clear All Final Check o,, F7 F8