You are considering investing in a new gold mine in South Africa. Gold in South Africa is buried very deep, so the mine will require an initial investment of

$ 255$255

million. Once this investment is made, the mine is expected to produce revenues of

$ 31 million$31 million

per year for the next

2020

years. It will cost

$ 10.5 million$10.5 million

per year to operate the mine. After

2020

years, the gold will be depleted. The mine must then be stabilized on an ongoing basis, which will cost

$ 5.2 million$5.2 million

per year in perpetuity. Calculate the IRR of this investment.

(Hint:

Plot the NPV as a function of the discount rate.)

The IRR of this investment is:(Select the best choice below.)

A.

There are multiple

IRRs.

B.

No positive IRR exists since the

NPV,

calculated as a function of various discount rates, never equals or exceeds zero.

C.

The IRR is about

10.3 %10.3%.

D.

The IRR is infinite as a result of the perpetuity.