Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 26QAP
a.
Summary Introduction
Adequate information:
Cost of gold mine=$3,400,000
Economic life = 11 years
Growth rate=8%
Abandonment cost at the end of Year 11= $450,000
To compute:
Introduction: IRR is defined as the rate at which the aggregate
b.
Summary Introduction
Adequate information:
Cost of gold mine=$3,400,000
Economic life = 11 years
Cash inflow at the end of Year 1=$575,000
Growth rate=8%
Abandonment cost at the end of Year 11= $450,000
To determine: Whether the project should be accepted if the required
Introduction: The project should be accepted or rejected by computing the NPV of the project. NPV is the net of the present value of cash inflows and the present value of cash outflows of a project.
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Investment Criteria. The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $750,000 to open and will have an economic life of 6 years. It will generate cash inflow of $175,000 at the end of the first year, and the cash inflows are projected to grow at 5 percent per year for the next 5 years. What is the IRR for the gold mine?
The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $3,400,000 to open and will have an economic life of 11 years. It will generate a cash inflow of $445,000 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 $500,000 at the end of Year 11.
a.
What is the IRR for the gold mine? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.
The Utah Mining Corporation requires a return of 8 percent on such undertakings. Should the mine be opened?
multiple choice
Yes
No
Investment Criteria. The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $750,000 to open and will have an economic life of 6 years. It will generate cash inflow of $175,000 at the end of the first year, and the cash inflows are projected to grow at 5 percent per year for the next 5 years. What is the IRR for the gold mine?
Please show the work.
Chapter 5 Solutions
Corporate Finance
Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQCh. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQCh. 5 - Prob. 8CQCh. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...
Ch. 5 - Net Present Value You are evaluating Project A and...Ch. 5 - Modified Internal Rate of Return One of the less...Ch. 5 - Net Present Value It is sometimes stated that the...Ch. 5 - Prob. 14CQCh. 5 - Prob. 1QAPCh. 5 - Prob. 2QAPCh. 5 - Prob. 3QAPCh. 5 - Prob. 4QAPCh. 5 - Prob. 5QAPCh. 5 - Prob. 6QAPCh. 5 - Prob. 7QAPCh. 5 - Prob. 8QAPCh. 5 - Prob. 9QAPCh. 5 - Prob. 10QAPCh. 5 - NPV versus IRR Consider the following cash flows...Ch. 5 - Prob. 12QAPCh. 5 - Prob. 13QAPCh. 5 - Prob. 14QAPCh. 5 - Prob. 15QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 17QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 19QAPCh. 5 - Prob. 20QAPCh. 5 - MIRR Suppose the company in the previous problem...Ch. 5 - Prob. 22QAPCh. 5 - Prob. 23QAPCh. 5 - Prob. 24QAPCh. 5 - Prob. 25QAPCh. 5 - Prob. 26QAPCh. 5 - Prob. 27QAPCh. 5 - Prob. 28QAPCh. 5 - Prob. 29QAPCh. 5 - Prob. 30QAPCh. 5 - Construct a spreadsheet to calculate the payback...Ch. 5 - Based on your analysis, should the company open...Ch. 5 - Prob. 3MC
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