A mining company plans to mine a beach for rutile. To do so will cost $14 million up front and then produce cash flows of $7 million per year for five years. At the end of the sixth year the company will incur shut-down and clean-up costs of $6 million.

a. If the cost of capital is 13.0%, calculate the IRR.

b. If the cost of capital is 13.0%, calculate the MIRR for the project.

c. Why do you find different answers for the IRR and the MIRR?