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The UUC Ltd is deciding whether it should go ahead with a new project, a mining venture. The Net Cost of which is Tshs 2

The UUC Ltd is deciding whether it should go ahead with a new project, a mining venture. The
Net Cost of which is Tshs 200 million. Net cash inflows are expected to be Tshs 1,300 million,
all, coming at the end of year 1. The land must be returned to its natural state at a cost of Tshs
1,200 million, payable at the end of Year 2.
(a) Plot the projects NPV profile (Hint: Calculate NPV at k =0,10%,80%,
and 450%, and possibly at other k values)
(b) Should the project be accepted if k =10%? If k =20%? Explain your
reasoning.
(c) Can you think of some other Capital Budgeting situations in which
Negative Cash Flows or at the other end of the projects life might lead to
Multiple IRRs?
(d) What is the projects MIRR at k =10%? At k =20%? Does the MIRR
method lead to the same accept/reject decision as the NPV method?

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