A mining company is deciding whether to open a strip mine with an initial outlay at t= 0 of $2.5 million. Cash Inflows of $12.5 million would occur at the end of Year 1. The land must be returned to its natural state so there is a cash outflow of $11 million, payable at the end of Year 2. a. Select the project's NPV profile. A NPV (Milions of Dollar) 2 0.5 -Select- The correct sketch is |-Select- b. Should the project be accepted if WACC = 10%? 100 200 300 -Select- WACC(%) % -Select- NPV (Milions of Dollar) 2 0.5 -0.51 100 B 200 300 400 Does MIRR lead to the same accept/reject decision for this project as the NPV method? 500 WACC(%) NPV (Milions) of Dollar should the project be accepted if WACC = 20%? -Select- c. What is the project's MIRR at WACC= 10%? Do not round Intermediate calculations. Round your answer to two decimal places. 281 17 What is the project's MIRR at WACC= 20%? Do not round Intermediate calculations. Round your answer to two decimal places. 9.₂ -0.5 100 с 200 300 400 500 Does the MIRR method always lead to the same accept/reject decision as NPV? (Hint: Consider mutually exclusive projects that differ in size.) WACC (%) NPV (Milions of Dollar 23 0.5 100 D 200 300 400 ndo WACC (%)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A mining company is deciding whether to open a strip mine with an initial outlay at t = 0 of $2.5 million. Cash Inflows of $12.5 million would occur at the end of Year 1. The land must be returned to its natural state so there is a cash outflow of $11 million, payable at the end of Year
2.
a. Select the project's NPV profile.
A
NPV
(Milions
of Dollar
2
0.5
0.5
1.3
-Select-
The correct sketch is -Select-
b. Should the project be accepted if WACC = 10%?
-Select-
Should the project be accepted if WACC = 20%?
200 300
-Select-
500
WACC (%)
%
%
NPV
(Millions
of Dollars
2
..
0.5
D
300 200
300
400 500
WACC(%)
c. What is the project's MIRR at WACC = 10%? Do not round Intermediate calculations. Round your answer to two decimal places.
Does MIRR lead to the same accept/reject decision for this project as the NPV method?
NPV
(Millions
of Dollars)
23
1.5
0.5
-0.5
What is the project's MIRR at WACC = 20%? Do not round Intermediate calculations. Round your answer to two decimal places.
100 200 300 400
с
Does the MIRR method always lead to the same accept/reject decision as NPV? (Hint: Consider mutually exclusive projects that differ in size.)
-Select-V
1500
WA CC(%)
NPV
(Millions
of Dollars)
d.g
0.5
9.5
D
100 200
300 400
1500
WA CC(%)
Transcribed Image Text:CO eBook A mining company is deciding whether to open a strip mine with an initial outlay at t = 0 of $2.5 million. Cash Inflows of $12.5 million would occur at the end of Year 1. The land must be returned to its natural state so there is a cash outflow of $11 million, payable at the end of Year 2. a. Select the project's NPV profile. A NPV (Milions of Dollar 2 0.5 0.5 1.3 -Select- The correct sketch is -Select- b. Should the project be accepted if WACC = 10%? -Select- Should the project be accepted if WACC = 20%? 200 300 -Select- 500 WACC (%) % % NPV (Millions of Dollars 2 .. 0.5 D 300 200 300 400 500 WACC(%) c. What is the project's MIRR at WACC = 10%? Do not round Intermediate calculations. Round your answer to two decimal places. Does MIRR lead to the same accept/reject decision for this project as the NPV method? NPV (Millions of Dollars) 23 1.5 0.5 -0.5 What is the project's MIRR at WACC = 20%? Do not round Intermediate calculations. Round your answer to two decimal places. 100 200 300 400 с Does the MIRR method always lead to the same accept/reject decision as NPV? (Hint: Consider mutually exclusive projects that differ in size.) -Select-V 1500 WA CC(%) NPV (Millions of Dollars) d.g 0.5 9.5 D 100 200 300 400 1500 WA CC(%)
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