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 $ 21.4 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 $ 1.6 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 7.6 %, 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 5 10 15 20 -15 -5 5 15 25 35 Discount Rate (%) NPV ($ millions) The graph shows the NPV of the investment in the coal mine. The x-axis on the graph shows discount rate in percentage; the axis values range from 0 to 20, at intervals of 5. The y-axis on the graph shows NPV in millions of dollars; the axis values range from minus 20 to $ 30.300+5, at intervals of 10. There is a steep curve that starts from the negative values of NPV. The curve reaches its maximum point that is a positive NPV value. From this maximum point, the curve starts sloping downward indicating a decrease in NPV with the increase in discount rate. What does the IRR rule say about whether you should accept this opportunity?(Select the best choice below.) A. Accept the opportunity because the IRR is greater than the cost of capital. B. There are two IRRs, so you cannot use the IRR as a criterion for accepting the opportunity. C. The IRR is r equals 12.32 %, so accept the opportunity. D. Reject the opportunity because the IRR is lower than the 7.6 % cost of capital. The NPV using the cost of capital of 7.6 % is $ nothing 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 equals 1.69 % and r equals 12.32 % What does the NPV rule say? (Select the best choice below.) A. If the opportunity cost of capital is greater than r equals 12.32 %, the investment should be undertaken. B. If the opportunity cost of capital is between r equals 1.69 % and r equals 12.32 %, the investment should be undertaken. C. Reject the project because the NPV is negative. D. If the opportunity cost of capital is less than r equals 1.69 %, the investment should be undertaken. Click to select your answer(s).

Question Help 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 $21.4 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 $1.6 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 7.6%, what does the NPV rule say? Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) O A. Accept the opportunity because the IRR is greater than the cost of capital. O B. There are two IRRs, so you cannot use the IRR as a criterion for accepting the opportunity. O C. The IRR is r= 12.32%, so accept the opportunity OD. Reject the opportunity because the IRR is lower than the 7.6% cost of capital. The NPV using the cost of capital of 7.6% is 6 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= 1.69% and r= 12.32% What does the NPV rule say? (Select the best choice below.) O A. If the opportunity cost of capital is greater than r= 12.32%, the investment should be undertaken. O B. If the opportunity cost of capital is between r= 1.69% and r= 12.32%, the investment should be undertaken. O C. Reject the project because the NPV is negative. OD. If the opportunity cost of capital is less than r= 1.69%, the investment should be undertaken Click to select your answer(s). Save for Later 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 $21.4 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 $1.6 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 7.6%, what does the NPV rule say? Use the graph below to determine the IRR(s) in the problem. NPV of the Investment in the Coal Mine NPV ($ millions) to t 5 20 Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) Click to select your answer(s). Save for Later Question Help 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 $21.4 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 $1.6 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 7.6%, what does the NPV rule say? Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) O A. Accept the opportunity because the IRR is greater than the cost of capital. O B. There are two IRRs, so you cannot use the IRR as a criterion for accepting the opportunity. O C. The IRR is r= 12.32%, so accept the opportunity OD. Reject the opportunity because the IRR is lower than the 7.6% cost of capital. The NPV using the cost of capital of 7.6% is 6 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= 1.69% and r= 12.32% What does the NPV rule say? (Select the best choice below.) O A. If the opportunity cost of capital is greater than r= 12.32%, the investment should be undertaken. O B. If the opportunity cost of capital is between r= 1.69% and r= 12.32%, the investment should be undertaken. O C. Reject the project because the NPV is negative. OD. If the opportunity cost of capital is less than r= 1.69%, the investment should be undertaken Click to select your answer(s). Save for Later 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 $21.4 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 $1.6 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 7.6%, what does the NPV rule say? Use the graph below to determine the IRR(s) in the problem. NPV of the Investment in the Coal Mine NPV ($ millions) to t 5 20 Discount Rate (%) What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) Click to select your answer(s). Save for Later