Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, This is a golden opportunity.

The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to
the treasurer, Monty Goldstein, "This is a golden opportunity." The mine will cost
$4,000,000 to open and will have an economic life of 11 years. It will generate a cash
inflow of $505,000 at the end of the first year, and the cash inflows are projected to
grow at 8 percent per year for the next 10 years. After 11 years, the mine will be
abandoned. Abandonment costs will be $560,000 at the end of Year 11.
a. What is the IRR for the gold mine? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g.,32.16.)
IRR
b. The Utah Mining Corporation requires a return of 9 percent on such projects. Should
the mine be opened?
Yes
No
image text in transcribed

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

Financial Management Theory And Practice

Authors: Eugene F Brigham, Michael C Ehrhardt

11th Edition

0324259689, 9780324259681

More Books

Students also viewed these Finance questions

Question

How should Disney manage their global diversity?

Answered: 1 week ago