You are considering investing in a new gold mine in South Africa. The mine will require an initial investment of $220M. Once this investment is made, the mine is expected to produce revenues of $25M per year for the next 20 years. It will cost $10M per year to operate the mine. After 20 years, the gold will be depleted. The mine must then be stabilized on an ongoing basis, which will cost $5M per year in perpetuity. Calculate the IRR of this investment. (Hint: Plot the NPV as a function of the discount rate.)

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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B 1. You are considering investing in a new gold mine in South Africa. The mine will require an initial investment of $220M. Once this investment is made, the mine is expected to produce revenues of $25M per year for the next 20 years. It will cost $10M per year to operate the mine. After 20 years, the gold will be depleted. The mine must then be stabilized on an ongoing basis, which will cost $5M per year in perpetuity. Calculate the IRR of this investment. (Hint: Plot the NPV as a function of the discount rate.)
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