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