Question
You are considering constructing a new plant in a remote wilderness area to process the ore from a planned mining operation. You anticipate that the
You are considering constructing a new plant in a remote wilderness area to process the ore from a planned mining operation. You anticipate that the plant will take a year to build and cost $103 million upfront. Once built. it will generate cash flows of $18 million per year starting two years from Today, In 21 years, after its 20th year of operation. the mine will run out of ore and you expect to pay $257 million to shut the plant down and restore the area to its pristine state. Using a cost of capital of 12%:
a. What is the NPV of the project?
b.Is the IRR rule reliable for this project? Explain.
c. What are the wires of this project?
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