Question
you owe a coal mining company and are considering opening a new mine.the mine itself will cost $117 million to open.if this money is spent
you owe a coal mining company and are considering opening a new mine.the mine itself will cost $117 million to open.if this money is spent immediately,the mine will generate $20 million for the next 10 years.after that,the coal will run out and the site must be cleaned and maintained at environmental standards.the cleaning and maintainance are expected to cost $1.8 million per year in perpetuity.what does the IRR rule say about whether you should accept this opportunity?(hint:consider the number of sign changes in the cash flows.) if the cost of capital is 8.2%.what does the NPV rule say?
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