You own a coal mining company and are considering opening a new mine. The mine will cost $120 million to open. If this money is spent immediately, the mine will generate $20 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $2 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity

Question

08-03-2021
Business

Answered

Find answers to your questions faster and easier with IDNLearn.com. Our community is here to provide the comprehensive and accurate answers you need to make informed decisions.

You own a coal mining company and are considering opening a new mine. The mine will cost $120 million to open. If this money is spent immediately, the mine will generate $20 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $2 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity

Sagot :

We value your presence here. Keep sharing knowledge and helping others find the answers they need. This community is the perfect place to learn together. IDNLearn.com is dedicated to providing accurate answers. Thank you for visiting, and see you next time for more solutions.

The Magnitude Of An Earthquake, [tex]R[/tex], Is Defined By:[tex]\[ R = \log_{10}\left(\frac{I_c}{I_n}\right) \][/tex]where [tex]I_c[/tex] Is The Intensity Of T

Use The Periodic Table To Determine How Many Atoms Of Phosphorus (P) Are In A Sample That Has A Mass Of [tex]172.90 \, \text{g}[/tex].A. [tex]3.48 \times 10^{21

The Browns Wish Toaccumulate At Least $150,000 At The Time Of Their Last Deposit In A College Fund For Their Daughter By Contributing An Amount A Into The Accou

Purnima Borrows Rs. 90,000 From A Bank At The Rate Of 14% Per Year And Returnsthe Amount At The End Of One Year 6 Months. If The Interest Was Compoundingyearly,

Question 19 (1 Point)Which Of The Following Is True Of Pubertal Change In Adolescents?A. Hormones Are Solely Responsible For Adolescent Behavior.B. Estradiol, A

Which Of The Following Is An Example Of A Range? Group Of Answer Choices the Headings At The Top Of A Spreadsheet a Group Of Adjacent Cells a Text String th

Which Of The Following Most Accurately Describes Ainsworth's Strange Situation Test Used To Measure Children's Attachment?A. The Caregiver And The Infant Watch

The Expression Given Does Not Form A Complete Mathematical Statement Or Question. To Make It Meaningful, We Can Reframe It Into A Problem Or Provide Context For

37. If The Sum Of The Diagonals Of A Rectangle Is 26 Centimeters And One Of Its Sides Is 5 Centimeters, Find The Sum Of The Lengths Of The Other Three Sides Of

Fill In The Blanks.1. ________ Defined Democracy As Government Of The People, By The People, For The People.2. In India, The Voting Age Is ________ Years.3. In

Parrainidn Parrainidn · Answer 1 · 2021-03-09T20:36:04-05:00

Answer: B. There are two IRRs so you cannot use the IRR as a criterion for accepting the opportunity.

Explanation:

The Internal Rate of Return can be useful in capital budgeting to enable a company know if an investment will be profitable. It is defined as the discount rate that causes the Net Present Value(NPV) to be zero. If the IRR is greater than the required return then the project should be accepted as it will have a profitable NPV.

IRR has some problems however and one of them is reflected here. There can sometimes be two IRRs and when this happens, using IRR as a viability measure cannot be done because a single rate is needed for comparison with the required return.

Sagot :

Other Questions