Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer every part. show work thank yo You are considering constructing a new plant in a remote wilderness area to process the ore from

please answer every part. show work thank yo image text in transcribed
You are considering constructing a new plant in a remote wilderness area to process the ore from a planned mining operation. You anticipate that the plant will take a year to build and cost $104 million upfront. Once built, it will generate cash flows of $17 million per year starting two years from today. In 21 years, after its 20 th year of operation, the mine will run out of ore and you expect to pay $236 million to shut the plant down and restore the area to its pristine state. Using a cost of capital of 13% : a. What is the NPV of the project? b. Is using the IRR rule reliable for this project? Explain. c. What are the IRRs of this project? a. What is the NPV of the project? The NPV of the project is $ million. (Round to one decimal place.) b. Is using the IRR rule reliable for this project? Explain. (Select the best choice below.) A. Yes, the IRR rule is reliable, because the project has a negative net present value. B. No, the IRR ruip is not reliable, because the project has a negative cash flow that comes after the positive ones. C. No, the IRR rule is not reliable, because the project has a negative net present value. D. Yes, the IRR rule is reliable, because the project has a negative cash flow that comes after the positive ones. c. What are the IRRs of this project? The IRRs of this project in ASCENDING order are % and %. (Round to two decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Buyable Your Guide To Building A Self Managing Fast Growing And High Profit Business

Authors: Steve Preda

1st Edition

0998447846, 978-0998447841

More Books

Students also viewed these Finance questions

Question

Need help for Question 1...

Answered: 1 week ago