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A mining company is deciding whether to open a strip mine, which costs $2.5 million. Cash inflows of $13.5 million would occur at the end
A mining company is deciding whether to open a strip mine, which costs $2.5 million. Cash inflows of $13.5 million would occur at the end of Year 1. The land must be returned to its natural state at a cost of $12.5 million, payable at the end of Year 2. a. Select the project's NPV profile. A B D NPV (Millions of Dollars 3 2.5 2 1.5 1 0.5 0 0.5 NPV (Millions of Dollars 3 2.5 2 1.5 1 0.5 0 NPV (Millions of Dollars 3 2.5 2 1.5 1 0.5 NPV (Millions of Dollars 3 2.5 2 1.5 1 0.5 11 0.5 0.5 - 0.5 LETRA 100200 300 400 100200 300 400 500 WA CC%) 100200 300 500 WA CC(% ++++ 400 500 WA CC%) 100200 300 400 500 WA CC/% The correct sketch is -Select- b. Should the project be accepted if WACC = 10%? -Select- Should the project be accepted if WACC = 20%? -Select- c. What is the project's MIRR at WACC = 10%? Do not round intermediate calculations. Round your answer to two decimal places. What is the project's MIRR at WACC = 20%? Do not round intermediate calculations. Round your answer to two decimal places. . % Does MIRR lead to the same accept/reject decision for this project as the NPV method? -Select- Does the MIRR method always lead to the same accept/reject decision as NPV? (Hint: Consider mutually exclusive projects that differ in size.) -Select
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