Question
The Utah Mining Co. is opened a new coal mine near Provo, Utah. The mine cost was $900,000 and has an economic life of 9
The Utah Mining Co. is opened a new coal mine near Provo, Utah. The mine cost was $900,000 and has an economic life of 9 years. It will generate cash inflow of $175,000 next year and will be equal over the life of the project. Abandonment cost will be $145,000 at the end of year 9. The cost of capital for the project is 10%. In year 2 an explosion occurred in the mine causing several injuries to workers. The company needed to compensate workers for a total of $250,000. The cost of repairing the mine and continuing it is $800,000. According to the decision rule for the internal rate of return, is continuing with the project a wise investment for the company?
The annual IRR is 9.06% and the investment does create wealth for the company. | ||
The annual IRR is 12.42% and the investment does create wealth for the company. | ||
The annual IRR is 9.06% and the investment does not create wealth for the company.
| ||
The annual IRR is 12.42% and the investment does not create wealth for the company. | ||
The annual IRR is irrelevant for the decision. |
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