Grand Banks Mining Inc. plans a project to strip-mine a wilderness area. Setting up operations and initial digging will cost $5 million. The first year's operations are expected to be slow and to net a positive cash flow of only $500,000. Then there will be four years of $2 million cash flows after which the ore will run out. Closing the mine and restoring the environment in the sixth year will cost $1 million.
Question a:
Therefore, NPV of the Project is $870,267
Question b:
Therefore, IRR of the Project is 15%
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