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| Teaching Since: | Apr 2017 |
| Last Sign in: | 418 Weeks Ago, 5 Days Ago |
| Questions Answered: | 3232 |
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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
The Ulmer Uranium Company is deciding whether or not it should open a strip mine, the net cost of which 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. 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 where 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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