Question
Problem 10-10 Grand Banks Mining Inc. plans a project to strip-mine a wilderness area. Setting up operations and initial digging will cost $5 million. The
Problem 10-10
Grand Banks Mining Inc. plans a project to strip-mine a wilderness area. Setting up operations and initial digging will cost $5 million. The first year's operations are expected to be slow and to net a positive cash flow of only $500,000. Then there will be four years of $2 million cash flows after which the ore will run out. Closing the mine and restoring the environment in the sixth year will cost $1 million.
- Calculate the project's NPV at a cost of capital of 11%. Enter your answers in dollars and not in millions of dollars. Use a minus sign to indicate a negative NPV. Round PVF values in intermediate calculations to four decimal places. Do not round any other intermediate calculations. Round your answer to the nearest dollar. $
- Calculate the project's IRR. Do not round intermediate calculations. Round your answer to nearest whole percentage. %
10-17
Callaway Associates, Inc. is considering the following mutually exclusive projects. Callaway's Cost of capital is 11%.
Year | Project A | Project B |
0 | ($80,000) | ($80,000) |
1 | $44,000 | $65,000 |
2 | $34,000 | $30,000 |
3 | $14,000 | $0 |
4 | $14,000 | $5,000 |
- Calculate each project's NPV and IRR. Round the answers to two decimal places.
Project A Project B NPV: $ $ IRR: % % - Which project should be undertaken? Project A or Project B
10-2
A project has the following cash flows.
C0 | C1 | C2 | C3 |
($700) | $200 | $500 | $244 |
- What is the project's payback period? Round the answer to two decimal places. year(s)
- Calculate the project's NPV at 12%. Do not round intermediate calculations. Round PVF and PVFA values in intermediate calculations to four decimal places. Round the answer to two decimal places. $
- Calculate the project's PI at 12%. Do not round intermediate calculations. Round PVF and PVFA values in intermediate calculations to four decimal places. Round the answer to two decimal places.
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