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A mining company is deciding whether to open a strip mine with an initial outlay at t = 0 of $1.5 million. Cash inflows of

A mining company is deciding whether to open a strip mine with an initial outlay at t = 0 of $1.5 million. Cash inflows of $13.5 million would occur at the end of Year 1. The land must be returned to its natural state so there is a cash outflow of $12.5 million, payable at the end of Year 2.

  1. Select the project's NPV profile.

    The correct sketch is -Select-ABCDItem 1 .

  2. Should the project be accepted if WACC = 10%?

    -Select-YesNoItem 2

    Should the project be accepted if WACC = 20%?

    -Select-YesNoItem 3

  3. 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-YesNoItem 6

    Does the MIRR method always lead to the same accept/reject decision as NPV? (Hint: Consider mutually exclusive projects that differ in size.)

    -Select-YesNoItem 7


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