You own a coal mining company and are considering opening a new mine. The mine will cost $115.3 million to open. If this money is spent immediately, the mine will generate $21.5 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 maintenance are expected to cost $1.7 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 8.4%, what does the NPV rule say? Use the graph below to determine the IRR(s) in the problem. NPV of the Investment in the Coal Mine 357 25- NPV ($ millions) 10 15 20 Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) O A. The IRR is r= 12.39%, so accept the opportunity OB. Reject the opportunity because the IRR is lower than the 8.4% cost of capital. O C. There are two IRRs, so you cannot use the IRR as a criterion for accepting the opportunity. OD. Accept the opportunity because the IRR is greater than the cost of capital. The NPV using the cost of capital of 8.4% is $0 million. (Round to three decimal places.) The plot of the NPV as a function of the discount rate is n-shaped. It intersects the x-axis at r= 1.78% and r= 12.39% What does the NPV rule say? (Select the best choice below.) O A. If the opportunity cost of capital is greater than r= 12.39%, the investment should be undertaken. OB. Reject the project because the NPV is negative. OC. If the opportunity cost of capital is between r= 1.78% and r= 12.39%, the investment should be undertaken. OD. If the opportunity cost of capital is less than r= 1.78%, the investment should be undertaken. = This question has multiple parts. A farmer sows a certain crop. It costs $230,000 to buy the seed, prepare the ground, and sow the crop. In one year's time it will cost $111,600 to harvest the crop. The farmer's best estimate is that the crop will be worth $360,000 in one year. The farmer can borrow and lend at an interest rate is 8%. Part A) The net present value (NPV) of the farmer's decision to proceed with this investment is closest to which of the following? O A. $230,000 OB. $563,333 OC. $0 OD. $103,333 Part B) The farmer is concerned about the uncertainty surrounding the price that she will receive for her harvested crop in one year. She has the opportunity to enter into a forward agreement whereby she can lock-in a sale price of $385,000 for her harvested crop in one year, thus eliminating any uncertainty. The cost of entering into this contract is $23,500, payable today. Should the farmer enter into this forward agreement and lock-in the sale price of her harvested crop? O A. Yes, she should enter into this agreement. OB. No, she should not enter into this agreement, Part C) What price would the farmer need to pay for the forward agreement described in Part B such that the NPV of her overall farming investment would be unchanged from that calculated in Part A? Price of forward contract such that NPV is unchanged: $(please round your answer to the nearest dollar)