Strip Mining Inc. can develop a new mine at an initial cost of $5 million. The mine
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Strip Mining Inc. can develop a new mine at an initial cost of $5 million. The mine will provide a cash flow of $30 million in 1 year. The land then must be reclaimed at a cost of $28 million in the second year.
a. What are the IRRs of this project?
b. Should the firm develop the mine if the discount rate is 10%? 20%? 350%? 400%?
Discount RateDepending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
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a Time Cash flow 0 5 million 1 30 million 2 28 million The graph below shows ...View the full answer
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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