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 $99 million upfront. Once built, it will generate cash flows of $14 million at the end of every year over the life of the plant. The plant will be useless 20 years after its completion once the mine runs out of ore. At that point you expect to pay $181 million to shut the plant down and restore the area to its pristine state. Using a cost of capital of 12%
1- what is the NPV of the project?
2- Is using the IRR rule reliable for the project?
3- What are the IRR's of the project
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