User Account

All Pages

Internal rate of return

Assignment Help Finance Basics
Reference no: EM132355715

The following set-up pertains to the following three questions

The Utah Mining Co. is opened a new coal mine Provo, Utah.The mine cost was $900,000 and has an economic life of 10 years. It will generate cash inflow of $175,000 next year and will be equal over the life of the project. Abandonment cost will be $145,000 at the end of year 10 , The cost of capital for the project is 8 %.

According to the decision rule for the "internal rate of return", is this project a wise investment for the company?

a. The annual IRR is 1 1 .38 % and the investment does not create wealth for the company.

b. The annual IRR is 12.42 % and the investment does not create wealth for the company.

c . The annual IRR is 13.2 % and the investment does not create wealth for the company.

d . The annual IRR is 11.38 % and the investment does create wealth for the company.

e . The annual IRR is 13.2 % and the investment does create wealth for the company a new coal mine near 

In year 2 an explosion occurred in the mine causing several injuries to workers. The company needed to compensate workers for a total of $250,000. The cost of repairing the mine and continuing it is $800,000. According to the decision rule for the "internal rate of return", is continuing with the project a wise investment for the company?

a. The annual IRR is 9.06 % and the investment does not create wealth for the company.

b. The annual IRR is 12.42 % and the investment does not create wealth for the company. 

c. The annual IRR is 12.42 % and the investment does create wealth for the company.

d. The annual IRR is 9.06 % and the investment does create wealth for the company The annual IRR is irrelevant for the decision.

Assume that after the explosion and in order to continue with the project Utah mining has to borrow money at 10.5 % , would the decision to continue with the project differ.

a. The annual IRR is still the same but the investment does not create wealth for the company anymore. 

b. The annual IRR changes and the investment does create wealth for the company.

C. annual IRR changes and the investment does not create wealth for the company anymore.

d. The annual IRR is irrelevant for the decision.

E. The orrowing rate is irrelevant to the decision. anymore.

Reference no: EM132355715

Questions Cloud

Create three test cases each consisting of a value : Create and return a list of all the int's in the range from 0 to maxInt not including maxInt that are divisible of both int's in twoInts.
What is mackenzie effective annual rate : Using a 365 day year, what is Mackenzie's Effective Annual Rate (EAR) cost of trade credit?
What sale price in dollars should be charged : If Linaweaver marks up total cost by 0.20, what sale price in dollars should be charged if 47,000 units are expected to be sold each year?
Write program that takes in a numeric grades of student : How to write program that takes in a numeric grades of student in class.y As students in class vary semester to semester, you will keep track of students grades
Internal rate of return : According to the decision rule for the "internal rate of return", is this project a wise investment for the company?
Write program that lets the user enter a non-negative : Write program that lets the user enter a non-negative integers than uses a look to calculate the factorial of that integer. Display the factorial.
What roman engineering accomplishment consider influential : Your essay should address the following: Connect: What Roman engineering accomplishment do you consider most influential to our own time and why?
How you could apply the concepts learned in the course : Discuss how you could apply the concepts learned in this course to your current or future career. Name at least one strategic management model discussed.
What is the current cost of common equity : Underestimated Inc.'s common shares currently sell for $36 per share. The firm believes that its shares should really sell for $54 per share.

Reviews

Write a Review

Finance Basics Questions & Answers

  How do you think the efficient-markets hypothesis should

how do you think the efficient-markets hypothesis should impact upon the drafting of accounting standards? bear in mind

  What would be the present value of these bonds

if the required rate of return in the market is 5% per annum and the bonds have 15 years left to maturity. Assume a face value (maturity value) of $1,000.

  What is the spot exchange rate

In the 90-day forward market, 1 British pound equals $1.50. If interest rate parity holds, what is the spot exchange rate ($/£)?

  Heavenly hotels inc will not pay any dividends for the next

heavenly hotels inc. will not pay any dividends for the next three years. heavenly will pay its first dividend of 2.00

  Trading for twelve years and during this period

Beta plc has been trading for twelve years and during this period has achieved a good profit record. To date, the company has not been listed on a recognised stock exchange.

  Looking for meaningful trends and patterns

You collect your previous reports and spreadsheets and pore over them, looking for meaningful trends and patterns.

  Accrual basis net income differ from cash basis net income

How does accrual-basis net income differ from cash-basis net income?- Explain when revenue may be recognized in the accounting records.

  Determine the relevant costs

Determine the relevant costs for American Airlines to fly a customer on a round-trip flight from Dallas to San Francisco on Friday, May 31, 2002, and returning on Monday, June 3, 2002?

  What is strategic management of operating exposure

What is Strategic Management of Operating Exposure? Please explain how does it works and give examples to explain.

  What was the company net capital spending for 2016

The company's 2016 income statement showed a depreciation expense of $325,000. What was the company's net capital spending for 2016?

  Suggest an offering price less

Underwriting costs charged by the investment dealer are 5 percent of the issue price. How many shares must the firm sell to net $10 million? Why does the investment dealer suggest an offering price less than the trading price?

  Does this data follow a binomial distribution

The following figures show the number of defective components supplied each day by a factory. Does this data follow a binomial distribution?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd