Multiple Rates of Return

The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2.

Select the correct graph for the project's NPV profile.

The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 1 .

Should the project be accepted if r = 9%? Explain your reasoning.

The project -Select-shouldshould notItem 2 be accepted because NPV is -Select-positivenegativeItem 3 .

Should the project be accepted if r = 12%? Explain your reasoning.

The project -Select-shouldshould notItem 4 be accepted because NPV is -Select-positivenegativeItem 5 .

What is the project's MIRR at r = 9%? Do not round intermediate calculations. Round your answer to two decimal places.

%

What is the project's MIRR at r = 12%? Do not round intermediate calculations. Round your answer to two decimal places.

%

Calculate the two projects' NPVs. Do not round intermediate calculations. Round your answers to the nearest dollar. Use a minus sign to enter negative values, if any.

NPV at r = 9%: $

NPV at r = 12%: $

Does the MIRR method lead to the same accept-reject decision as the NPV method?

The MIRR method -Select-leadsdoes not leadItem 10 to the same accept-reject decision as the NPV method.