You own a coal mining company and are considering opening a new mine. The mine itself will
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You own a coal mining company and are considering opening a new mine. The mine itself will cost $118 million to open. If this money is spent immediately, the mine will generate $19 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.5 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 7.7%, what does the NPV rule say?
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Related Book For
Corporate Finance The Core
ISBN: 9781292431611
5th Global Edition
Authors: Jonathan Berk, Peter DeMarzo
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