6.20 The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to...

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6.20 The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Steven Sample, “This is a golden opportunity.” The mine will cost $600,000 to open. It will generate a cash inflow of $100,000 during the first year and the cash flows are projected to grow at 8 percent per year for 10 years. After 10 years the mine will be abandoned. Abandonment costs will be $50,000.

a. What is the IRR for the gold mine?

b. The Utah Mining Corporation requires a 10 percent return on such undertakings.

Should the mine be opened?

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Corporate Finance

ISBN: 9780071229036

6th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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