Accept the opportunity because the irr is greater

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You own a coal mining company and are considering opening a new mine.

The mine itself will cost $ 115.1 million to open. If this money is spent? immediately, the mine will generate $ 19.5 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 $ 1.5 million per year in perpetuity. What does the IRR rule say about whether you should accept this? opportunity? If the cost of capital is 7.8 %, what does the NPV rule? say?

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 IRR?s, so you cannot use the IRR as a criterion for accepting the opportunity.

C. The IRR is r=9.74%?, so accept the opportunity.

D. Reject the opportunity because the IRR is lower than the 7.8% cost of capital.

Reference no: EM132499429

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