Plot the projects NPV profile

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Question - MUTIPLE IRRS AND MIRR A mining company is deciding whether to open a strip mine, which costs $2 million Cash inflows of $13 million would occur at the end of Year 1. The land must be returned to its natural state at a cost of $12 million, payable at the end of Year 2.

a. Plot the projects NPV profile.

b. Should the project be accepted if WACC 10%? If WACC 20%? Explain your reasoning.

c. Think of some other capital budgeting situations in which negative cash flows during or at the end of the projects life might lead to multiple IRRs.

d. What is the project's MIRR at WACC 10%? At WACC 20%? Does MIRR lead to the same accept/reject decision for this project as the NPV method? Does the MIRR method always lead to the same accept/reject decision as NPV?(Hint: Consider mutually exclusive projects that differ in size.)

Reference no: EM132747202

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