Question
The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, it is a golden opportunity.
The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, it is a golden opportunity. The mine will cost $3,400,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $575,000 at the end of the first year, and the cash inflows are projected to grow at 8% per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $450,000 at the end of Year 11.
-
What is the IRR for the gold mine?
-
The Utah Mining Corporation requires a return of 13% on such projects. Should the mine be opened?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started