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A mining company is considering whether to develop a mining property. It is estimated that...

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Accounting

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A mining company is considering whether to develop a mining property. It is estimated that an immediate expenditure of $6 million will be needed to bring the property into production. Thereafter, the net cash inflow will be $1.2 million at the end of each year for the next 10 years. After that, an additional expenditure of $3 million at the end of the 11th year will be required to close down the mine and restore the surrounding area. For projects like this, the company would expect to earn at least j = 16%. (a) Should the company proceed with the investment? (b) What would the immediate expenditure have to be before your answer to (a) would change? (A) Yes (B) No

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