Values of the cost of capital

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Reference no: EM131012880

Copco Mining, a copper mining company is considering a mining project that will have an initial cost of $4,550,000 and generate revenues of $3,500,000 per year for three years. During the fourth year, the mine will be shut down and there will be clean-up costs of $ 6,000,000 to restore the land to its original state, (a process that will be completed during the fourth year.) The plot of the NPV of this project (i.e., its NPV profile) for interest rates varying from 0 to 20% is given below. Can you use the IRR rule to decide whether to undertake this project or not? Why or why not? Explain. According to this profile for what values of the cost of capital is it worth undertaking the project? Explain why.

Reference no: EM131012880

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