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A mining company is deciding whether to open a strip mine, which costs $1.5 million. Cash inflows of $14 million would occur at the end
A mining company is deciding whether to open a strip mine, which costs $1.5 million. Cash inflows of $14 million would occur at the end of Year 1. The land must be returned to its natural state at a cost of $12 million, payable at the end of Year 2. a. Select the project's NPV profile. A B NPV (Millions of Dollars NPV (Millions of Dollars 2. 1.5 2.5 1.5 0.5 0. 0.5 0.5 100 200 300 400 100 200 300 400 500 WACC(% 500 WA CC(% C D NPV (Millions of Dollars NPV Millions of Dollars 2.5 1.5 2.5 1.5 0.5 0. 0.5 0.5 100 200 300 400 100 200 300 500 WA CC(% 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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