7. A firm is considering a mining project with the following cash flows (with the final...

50.1K

Verified Solution

Question

Finance

7. A firm is considering a mining project with the followingcash flows (with the final cash flow being negative, perhaps due toan extensive land reclamation in the project’s final year):
C0 = –$420, C1 = $420, C2 = $462, C3 = $546, C4 = $420, and C5 =–$1554. (a) From among the following multiple-choice answers,calculate this project’s internal rate(s) of return: 5.070%,25.225%, 33.333%, 51.909%, 82.425%. (2 pts.) (b) If the requiredreturn is 30.000%, should the project be rejected or accepted?Briefly, clearly justify and explain your reasoning. (2 pts.)

Answer & Explanation Solved by verified expert

3.6 Ratings (414 Votes)

IRR is calculated by solving for the follwing equationNPV will be 0 when we discount using the IRR as IRR is the rateat which the cash inflows cash outflowsNow basically we need to use either hit and trial method orthe the goal seek function for finding out the IRR which satisfiesthe above See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

7. A firm is considering a mining project with the followingcash flows (with the final cash flow being negative, perhaps due toan extensive land reclamation in the project’s final year):C0 = –$420, C1 = $420, C2 = $462, C3 = $546, C4 = $420, and C5 =–$1554. (a) From among the following multiple-choice answers,calculate this project’s internal rate(s) of return: 5.070%,25.225%, 33.333%, 51.909%, 82.425%. (2 pts.) (b) If the requiredreturn is 30.000%, should the project be rejected or accepted?Briefly, clearly justify and explain your reasoning. (2 pts.)