Should the mine be opened

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Reference no: EM131314685

The mine will cost $3,900,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $495,000 at the end of the first year, and the cash inflows are projected to grow at 8 percent per year for the next 10 years. After 11 years, the mine will be abandoned. Abandonment costs will be $550,000 at the end of year 11.

a. What is the IRR for the gold mine? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) IRR %

b. The Utah Mining Corporation requires a return of 8 percent on such undertakings. Should the mine be opened?

Reference no: EM131314685

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