Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Textbook Question
Chapter 12, Problem 19P
The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net
- a. Plot the project’s
NPV profile. - b. Should the project be accepted if r = 8%? If r = 14%? Explain your reasoning.
- c. Can you think of some other capital budgeting situations in which negative cash flows during or at the end of the project’s life might lead to multiple
IRRs ? - d. What is the project’s MIRR at r = 8%? At r = 14%? Does the MIRR method lead to the same accept-reject decision as the NPV method?
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a. Select the project's NPV profile.
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(Millions
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(Milions
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b. Should the project be accepted if WACC = 10%?
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Should the project be accepted if WACC = 20%?
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c. What is the project's MIRR at WACC = 10%? Do not round intermediate calculations. Round your answer to two decimal places.
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What is the project's MIRR at WACC = 20%? Do not round intermediate calculations. Round your answer to two decimal places.
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Does MIRR lead to the same accept/reject decision for this project as the NPV…
Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a mineral deposit on land to which the
company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would
be associated with opening and operating a mine in the area:
Cost of new equipment and timbers
Working capital required
Annual net cash receipts
Cost to construct new roads in year three
Salvage value of equipment in four years
$ 410,000
$ 225,000
$ 160,000*
$65,000
$ 90,000
*Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance, and so forth.
The mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for
reinvestment elsewhere. The company's required rate of return is 19%.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Required:
a. What is the net present value of the…
The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land must be returned to its natural state at a cost of $25 million, payable at the end of Year 2.
a. Select the correct graph for the project's NPV profile.
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NPV(Millions of Dollars)
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Discount Rate (%)
100
200
300
400
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b. Should the project be accepted if r = 6%? Explain your reasoning.
The project -Select- ✓ be accepted because NPV is-Select- ✓
Should the project be accepted if r = 11%? Explain your reasoning.
The project -Select-
be accepted because NPV is -Select-
c. What is the project's MIRR at r = 6%? Do not round intermediate calculations. Round your answer to two decimal places.
What is the project's MIRR at r = 11%? Do not round intermediate calculations. Round your answer to two decimal places.
100
200
-1 Discount Rate (%)
-2
-3
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NPV at…
Chapter 12 Solutions
Intermediate Financial Management
Ch. 12 - What types of projects require the least detailed...Ch. 12 - Prob. 3QCh. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - A project has an initial cost of 40,000, expected...Ch. 12 - IRR Refer to Problem 12-1. What is the projects...Ch. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6P
Ch. 12 - Your division is considering two investment...Ch. 12 - Edelman Engineering is considering including two...Ch. 12 - Prob. 9PCh. 12 - Project S has a cost of $10,000 and is expected to...Ch. 12 - Prob. 11PCh. 12 - After discovering a new gold vein in the Colorado...Ch. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - The Pinkerton Publishing Company is considering...Ch. 12 - Shao Airlines is considering the purchase of two...Ch. 12 - The Perez Company has the opportunity to invest in...Ch. 12 - Filkins Fabric Company is considering the...Ch. 12 - The Ulmer Uranium Company is deciding whether or...Ch. 12 - The Aubey Coffee Company is evaluating the...Ch. 12 - Your division is considering two investment...Ch. 12 - The Scampini Supplies Company recently purchased a...Ch. 12 - You have just graduated from the MBA program of a...Ch. 12 - Prob. 2MCCh. 12 - Define the term “net present value (NPV).” What is...Ch. 12 - Prob. 5MCCh. 12 - What is the underlying cause of ranking conflicts...Ch. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - Prob. 9MCCh. 12 - Prob. 10MCCh. 12 - In an unrelated analysis, you have the opportunity...Ch. 12 - Prob. 12MC
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