ABC Company is considering investing in a new mining project. The firm's cost of capital is 12 percent and the project is expected to have an initial after-tax cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4? (a) Calculate the project's NPV. (b) Calculate the project's IRR. (c) Should the firm make the investment?
ABC Company is considering investing in a new mining project. The firm's cost of capital is 12 percent and the project is expected to have an initial after-tax cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4? (a) Calculate the project's NPV. (b) Calculate the project's IRR. (c) Should the firm make the investment?
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
Section: Chapter Questions
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ABC Company is considering investing in a new mining project. The firm's cost of capital is 12 percent and the project is expected to have an initial after-tax cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4?
(a) Calculate the project's NPV.
(b) Calculate the project's IRR.
(c) Should the firm make the investment?
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